Tax Cuts and Jobs Act Failed to Live up to Promise

5 mins read
Photo by Josh Appel on Unsplash

It has been a little over two years since President Trump signed the Tax Cuts and Jobs Act (TCJA). Has it lived up to the promises made by President Trump and other Republicans? Let’s look at the evidence.

President Trump signed the TCJA in December of 2017. In promoting the bill, he promised a tremendous increase in the Gross Domestic Product (GDP), up to five or six percent, which was supposed to pay for the tax cuts. The Congressional Budget Office recently projected that GDP growth during the next ten years would be less than 2% per year. Trump’s promise to America is not happening.

Trump also told us that the law would be a boost to the middle class. Based on an October 2017 report from his Council of Economic Advisors, he and his supporters claimed that average household income would increase at least $4,000 a year through a rise in average hourly pay. Rep. Tim Walberg often mentions this, as he did in a November 2017 press release, “Our plan is geared towards giving low and middle-income families a break, increasing take-home pay, and putting more money in people’s pockets.” The average hourly wage has increased slightly by about 3.3%, but 44% of jobs still pay $18,000 or less. So, will we reach an increase of $4,000 per year? According to a well-respected economic research firm, Macroeconomic Advisors, the average hourly growth in pay for 2019 would have to have reached 7.8% to reach $4,000. Trump’s promise to America did not happen.

What about job growth? Speaking about the TCJA, Rep. Walberg stated that, “It will help create more good-paying jobs.” However, employment remains about the same as it was before the tax overhaul, suggesting that the reduction in taxes for businesses had a limited impact on job growth. In 2019, the National Association of Business Economics found that 84% of American businesses did increase their revenue, but did not increase their hiring. We were led to believe that this revenue increase would be invested in capital expenditures. But, an analysis of Fortune 500 companies by the International Monetary Fund in May 2019 revealed that only 20% of that increased revenue went towards capital expenditures or R & D. Trump’s promise to America did not happen.

So, where did the rest of the tax savings for businesses go? It went to dividend payments to their stockholders, share buybacks, and other asset adjustments — which was initially great for stockholders. One problem is that only 55% of Americans hold any stock. That means 45% of Americans never benefitted from these dividends. Another problem is that share buybacks reduce the number of the company’s shares in the market thereby jacking up their prices, a move which can benefit corporate executives and stockholders. In 2018, according to Business Insider, buybacks surpassed a record of $1 trillion dollars in 2018, 50% more than before the TCJA went into effect. So, where did the tax savings for business go? It went to the wealthy, not to the people in the lower half of the income distribution. Economically, the Republican party does not represent most Americans. They have set things up to give a windfall to the rich, and give very little to the rest of us. 

Finally, the TCJA is leading us into an unsustainable federal deficit. The government must borrow money with interest, just as we do when we take out a loan. According to the Committee for a Responsible Federal Budget, these interest payments will overtake what is spent on Medicaid in 2020 and the Department of Defense budget in 2023. The TCJA does not work the way Trump and Congress promised. The next time you hear your Member of Congress brag about its success, confront him or her with the truth. They’ll probably say that Medicare and Social Security need to be reduced because our debt is so large. Trump’s promise to Americans is not happening. When you hear or read what they say be skeptical and look at the evidence.


DemCast is an advocacy-based 501(c)4 nonprofit. We have made the decision to build a media site free of outside influence. There are no ads. We do not get paid for clicks. If you appreciate our content, please consider a small monthly donation.


Hank Cetola is a professor emeritus at Adrian College and the founder of Lenawee Indivisible. He can be reached at lenaweeindivisible3 at gmail.com.

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