Trump Tax Cuts: A Mixed Bag for U.S. Economy and Inequality

The Trump tax cuts, enacted in 2017, have had a significant impact on the U.S. economy and the distribution of wealth and income. While the tax cuts have boosted investment, wages, and economic activity, they have also increased the federal deficit and exacerbated economic inequality. In this article, we will explore the economic implications of the Trump tax cuts and their potential long-term consequences for the U.S. economy and income inequality.

The Trump tax cuts, also known as the Tax Cuts and Jobs Act (TCJA), were one of the most significant changes to the U.S. tax code in decades. The TCJA lowered the corporate tax rate from 35% to 21%, reduced individual tax rates, and expanded the standard deduction. The tax cuts were intended to stimulate economic growth, increase investment, and boost wages.

According to the White House Office of Management and Budget, the Trump tax cuts resulted in a full percentage point higher GDP growth than CBO's pre-TCJA forecast in the first two years after their passage. This increased economic growth led to a substantial increase in federal tax revenues, with revenues averaging $205 billion per year over CBO's projections. The tax cuts also contributed to a significant increase in real median household income, which rose by $5,000 in just two years, a larger increase than in the prior eight years combined. Additionally, wages increased by 4.9 percent, the fastest two-year growth in real wages in 20 years. The poverty rate and unemployment rate reached their lowest levels in 50 years, with all-time lows in unemployment among African American and Hispanic workers, and those without a high-school degree.

However, the Trump tax cuts have also had a disproportionate impact on high-income individuals and corporations. According to a study by Gabriel Chodorow-Reich, Owen Zidar, and Eric Zwick, the TCJA has boosted investment, wages, and economic activity, but it has not made up for substantial losses in corporate tax revenues, which have increased the federal deficit. The top 1% of households saw their share of federal taxes go up, while the tax burden paid by lower-income earners decreased. Americans earning under $100,000 received an average tax cut of 16 percent.



The increased federal deficit resulting from the Trump tax cuts could lead to cuts in government programs that disproportionately benefit lower-income individuals, further exacerbating economic inequality. The increased deficit could also lead to higher interest rates, which would disproportionately affect lower-income individuals who are more likely to have variable-rate debt.

Moreover, the Trump tax cuts have disproportionately benefited the wealthy, who have seen their incomes and wealth grow at a faster rate than those of lower-income individuals. This could lead to a further concentration of wealth and income at the top, exacerbating income and wealth inequality in the U.S.

In conclusion, the Trump tax cuts have had a significant impact on the U.S. economy and the distribution of wealth and income. While the tax cuts have boosted investment, wages, and economic activity, they have also increased the federal deficit and exacerbated economic inequality. In the long term, the Trump tax cuts could lead to a further concentration of wealth and income at the top and potentially lead to cuts in government programs that disproportionately benefit lower-income individuals. As the Trump tax cuts continue to shape the U.S. economy, it is crucial to monitor their impact on economic growth, income inequality, and government spending.