It has been over a year since the passage of the Tax Cuts and Jobs Act (TCJA), and despite efforts from its proponents to massage the data and deceive the public about its effects, it’s clear that TCJA has completely failed to deliver on its promises, and has left the nation worse off. Link to op-ed.
TCJA proponents promised the tax law would increase economic growth, boost wages, and create jobs. But so far, the tax cuts have delivered some short-term benefits to wealthy shareholders, while wages, jobs and the economy have continued to grow at the same pace they did before, providing little evidence of any tax cut fueled boost.
One key promise from the law’s proponents was that large corporate tax cuts would spur capital investment by businesses. That failed to materialize. The year-over-year increase in real, private nonresidential fixed investment in the first quarter of 2019 was 4.8 percent. In comparison, the year-over-year increase in the first quarter of 2018, before the tax cuts had gone into effect, was 6.7 percent. In fact, since 2010, capital investment routinely saw higher growth rates than what has been seen since the tax cuts went into effect.
With a lack of capital investment, it’s no surprise that there has not been a boom in employment either. Since the tax cuts went into effect, monthly job growth has averaged 0.15 percent. In the two years before the tax cuts went into effect, monthly job growth averaged 0.14 percent. There has been barely a blip in the pace of job growth since the tax cuts were enacted.
The same is true for the promised boost to pay. President Trump promised the tax cuts would lead to a $4,000 pay raise for the typical American household, and that corporations would “shower” workers with bonuses. Instead, only 4.4 percent of workers have received a bonus or raise tied to the tax cuts, while corporations have spent $853 billion in stock buybacks, 120 times the amount of bonuses paid out, mostly benefiting the already wealthy. And while average monthly wage growth has averaged 0.26 percent since the tax cuts have been enacted, it averaged 0.23 percent the year before the tax cuts, once again showing nearly no impact.
West Virginia is no different. While the state has experienced relatively strong job growth over the past year, it has all come from natural gas and pipeline construction. Outside of construction, West Virginia has experienced almost no job growth in the past year. And while the job growth in construction was welcome, it has nothing to do with the tax cuts. The pipeline projects and natural gas drilling were all planned long before the tax cuts were even an idea.
What the TCJA has done, for certain, is increase income inequality while ballooning the federal deficit. The bill was designed to give the largest tax cuts to the very wealthy with 70 percent of the total tax cuts going to the top 20 percent of taxpayers. While middle-class Americans received an average tax cut of around $800, the richest one percent of taxpayers are getting an average tax cut of nearly $50,000.
And according to the Congressional Budget Office, the TCJA will add $1.9 trillion to the federal deficit in the next decade. With such an increase, it’s clear that the TCJA and its proponents care more about giving massive tax cuts to the wealthy than they do about basic infrastructure, child care, job training, the opioid epidemic and countless other priorities.