Today, December 22nd, marks the five-year anniversary of the signing of the Tax Cuts and Jobs Act of 2017. This legislation delivered meaningful tax relief to the American people and helped fuel the strongest U.S. economy in recent history. 

Still, for five years, the TCJA has been relentlessly maligned by Democratic operatives and the media. Leaders like President Biden, Vice President Harris, and Speaker Pelosi, to this day, call the legislation a handout to the “top one percent.” During their campaign for the White House, Joe Biden and Kamala Harris called for its elimination at least 22 times

If the TCJA is repealed, or its individual income tax cuts are not extended, American families will be faced with massive tax hikes. We must ensure that Americans know the truth about this important piece of legislation. 

Here are the three most egregious myths told about the Republican tax cuts. 

Myth #1: The TCJA only benefited the rich.

This myth is the most common one circulated by the Left. In reality, the TCJA primarily benefited low- and middle-income families. In fact, after the TCJA was passed, individuals who made over $1 million saw a slight increase in their tax liability. 

A simple analysis of the Internal Revenue Service’s 2020 Statistics of Income (SOI) data demonstrates that most American families saw a significant tax cut. This tax cut is measured as the percentage decrease in “total tax liability” between 2017 and 2020:

  • Americans making between $25K and $50K saw a 23.1% tax cut. Households with income between $25,000 and $50,000 saw their average federal income tax liability drop from $2,272.89 in 2017 to $1,846.78 in 2020, a 23.1% reduction.
  • Americans making between $50K and $75K saw a 20.8% tax cut. Households with adjusted gross income between $50,000 and $75,000 saw their average federal income tax liability drop from $5,503.53 in 2017 to $4,554.17 in 2020, a 20.8% reduction.
  • Americans making between $75K and $100K saw a 16.7% tax cut. Households with adjusted gross income between $75,000 and $100,000 saw their average federal income tax liability drop from $8,973.93 in 2017 to $7,688.17 in 2020, a 16.7% reduction.

As mentioned, Americans making over $1 million actually saw a 0.4% tax hike. Democrats claim the tax cuts were for “the rich” but as shown by the data, middle-income Americans saw a greater tax cut than those earning over $1 million, though you won’t hear Democrats admit it. 

Myth #2: The TCJA did nothing to increase investment and economic activity in the U.S.

The TCJA reduced the corporate tax rate from 35% to 21%, allowed full expensing of equipment investments, created a new 20% deduction for small businesses organized as passthrough entities, and created a new deduction for foreign derived intangible income (FDII). 

While Democrats tend to disagree with Republicans’ assertion that the TCJA led to increased investment and economic activity, these reforms have certainly proven effective. 

One International Monetary Fund working paper found “that U.S. business investment since 2017 has grown strongly compared to pre-TCJA forecasts and that the overriding factor driving it has been the strength of expected aggregate demand.” 

Further, a study by the left-of-center Tax Policy Center found that the TCJA made the United States a more competitive place to do business and led to more investment in the economy from foreign-owned U.S. businesses. The study noted a positive relationship between the “tax cuts and foreign-owned companies’ investment in U.S. tangible assets.” 

This is no surprise, as it is a well-known phenomenon that lower corporate rates lead to higher investment. One Treasury Department study estimated that “a country with a one percentage point lower tax rate than its competitors attracts 3% more capital.”

American workers also saw the fruit of the corporate tax reduction. In fact, corporate taxes are primarily borne by workers. According to the Stephen Entin of the Tax Foundation, labor (or workers) bears an estimated 70% of the corporate income tax in the form of wages and employment. Similarly, a 2012 paper at the University of Warwick and University of Oxford found that a $1 increase in the corporate tax reduces wages by 92 cents in the long term.

Corporate taxes are also borne by consumers in the form of higher prices. When taxes are higher, companies will pass on this cost to consumers. According to a 2020 National Bureau of Economic Research paper, 31% of the corporate tax rate is borne by consumers through higher prices of goods and services.

In this way, reducing the corporate tax rate allows businesses to raise their employees’ wages, hire new workers, and lower prices for consumers. After TCJA’s passage, wages grew by 4.9%, the fastest two-year growth in wages in 20 years. It’s hard to imagine how devastated the economy would be now if Republicans hadn’t passed these tax cuts before the COVID-19 pandemic hit. 

Myth #3: The TCJA made the tax code less progressive. 

Contrary to Democrats’ assertions that the TCJA disproportionately benefited the rich, data from the Congressional Budget Office (CBO) show that the TCJA made the tax code more progressive, not less. In other words, those who made more money paid a higher effective tax rate after the tax cuts while those who made less paid a lower effective tax rate. 

The report found that the top one percent of earners and the top 20% of earners paid a greater share of income taxes and federal taxes after the TCJA was signed into law:

  • The top one percent of earners paid 38.6% of income taxes in 2017 and 41.7% of income taxes in 2018.
  • The top 20% of earners paid 87.1% of income taxes in 2017 and 90.9% of income taxes in 2018.
  • The top one percent of earners paid 25.5% of all federal taxes in 2017 and 25.9% of income taxes in 2018.
  • The top 20% of earners paid 69.3% of all federal taxes in 2017 and 69.8% of federal taxes in 2018.

This report proves that the claim the TCJA benefited the rich is merely a left-wing talking point.

While Biden and Democrats continue to mislead about the benefits of the TCJA, the fact is that this law reduced taxes for middle-class families across the country, strengthened the economy, and made the tax code more, not less, progressive.