Did the 2017 Tax Cut Leave the Majority of Americans Behind?
In his recent State of the Union speech, President Biden stated, “Unlike the $2 trillion tax cut passed in the previous administration that benefited the top 1 percent of Americans, the American Rescue Plan helped working people — and left no one behind.”
Excuse me? It’s true that the Trump tax cut benefited the top 1 percent of Americans. But it also helped Americans at all income levels. It helped in two ways. First, it cut taxes for virtually everyone and often by a lot. Second, the 2017 tax cut increased incentives to invest in more capital. With more capital to work with, workers were more productive and their higher productivity showed up in higher wages.
These are the opening two paragraphs of David R. Henderson, “Correcting Biden,” Taxbytes, Institute for Policy Innovation, March 9, 2022.
In his speech, President Biden used the term “trickle down” to refer to the idea that tax cuts on corporations and on the most productive people will help workers generally. Here’s the interesting thing about that term: no one who advocates such tax cuts uses the term “trickle down.” There’s an obvious reason why. Given how well tax cuts have worked, a much more accurate term is “gush down.”
Do read the whole thing. It’s quite short.