The Tax Cuts and Jobs Act of 2017 was marketed as a victory for American workers and the middle class. However, a closer look at the data reveals a different story—one where tax cuts disproportionately favor the wealthy while offering only modest benefits to middle-income families.
The Disproportionate Distribution of Benefits
The allocation of tax cut benefits paints a stark picture of inequality:
- Top 1% of earners (over $733,000 annually) received around 21% of the total tax cuts.
- Top 5% (over $308,000) claimed approximately 34% of the benefits.
- Meanwhile, the bottom 60% (those making under $86,000) collectively took home only 13% of the benefits.
This breakdown highlights how the wealthiest Americans reaped the most significant rewards, leaving the middle class with far less.
Average Tax Savings: A Tale of Two Americas
The average tax savings across income groups underscores this disparity:
- The top 1% enjoyed an average annual tax savings of $51,000.
- Middle-income earners (making between $49,000 and $86,000) received an average tax cut of $800.
- The bottom 20% (earning under $25,000) saw a mere $60 in tax savings.
For every $100 in tax cuts, $21 went to the top 1%, while only $13 was shared among the bottom 60%.
Long-Term Implications: The Rich Get Richer
The long-term impact of these tax cuts is troubling. By 2027, when some individual tax cuts expire:
- The top 1% will still enjoy an average tax cut of $61,000.
- The bottom 60% will experience a slight tax increase on average.
The fact that corporate tax cuts are permanent while individual tax cuts are temporary only intensifies the imbalance.
Corporate Tax Cuts: Trickle-Down or Gush-Up?
The corporate tax rate was slashed from 35% to 21%, justified as a move to create jobs and boost wages. In reality, much of this corporate windfall went to stock buybacks, benefiting shareholders—who are predominantly wealthy. In fact, the wealthiest 10% of Americans own 84% of all stocks.
How Could the Tax Cuts Have Better Served the Middle Class?
- Progressive Rate Cuts: More significant reductions in middle-income tax brackets rather than top-income brackets.
- Expanded Credits: Increasing refundable credits like the Earned Income Tax Credit to provide more direct relief.
- Infrastructure Investment: Redirecting funds toward infrastructure projects to create jobs and support middle-class communities.
- Education and Training: Investing in education and job training to better prepare workers for evolving job markets.
- Healthcare Cost Reduction: Targeting healthcare cost reduction, which would have offered meaningful financial relief.
Conclusion
The 2017 Tax Cuts and Jobs Act delivered benefits across income levels, but its structure heavily favored the wealthy. A tax reform truly focused on the middle class would have aimed for deeper cuts for average earners, long-term financial security for working families, and investments in the nation’s future. Instead, the result is a tax code that deepens income inequality and neglects the real economic struggles of millions of Americans.