The Tax Cuts and Jobs Act, signed by Donald Trump in 2017, is set to expire on December 31, 2024. While it was the most extensive tax overhaul since Reagan's administration, it primarily favored corporations, wealthy individuals, and tax partnerships, with over 80% of the cuts directed to these groups. Despite promises of middle-class relief, the advantages were modest, and the law added $1.9 trillion to the national deficit. Its helpful impact on Black, middle-income, and low-income taxpayers was particularly limited, exacerbating existing economic inequalities. As Republicans negotiate new tax policies in 2025, lessons from the 2017 reforms remain critical. Trump's tax cuts deepened racial income and wealth disparities, as the corporate tax savings primarily benefited wealthy shareholders rather than the broader population. In the U.S., most shareholders are corporations, pension funds, and wealthy individuals, which are predominantly composed of white Americans. Trump's tax cuts required the IRS to calculate inflation adjustments using the Chained CPI. Many consumers had to switch to cheaper alternatives as prices rose. For instance, it assumed shoppers would buy pork instead of beef as they tried to minimize the perceived impact of inflation. In addition, this approach resulted in smaller inflation adjustments, disproportionately affecting low-income communities with limited access to budget-friendly alternatives. Since Black Americans are more likely than low-income white Americans to live in underserved neighborhoods, they have been more severely impacted by rising prices. Finally, with the Trump tax cuts set to expire, Congress can reassess their impact and address the inequalities they worsened. By crafting policies that promote fairness, lawmakers should work toward a tax system that supports all Americans more effectively.
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2 comments:
Tax policies are definitely becoming a more and more polarizing topic nowadays. With new policies being crafter I hope they aren't concentrated among the wealthy and actually serve the middle and lower classes proportionately. This is something I want to learn more about especially because at the Economic Outlook conference one of the speakers mentioned that there is a possibility that the middle class is going to be hollowed out.
It will be very interesting to see how the new administration goes about legislating new tax policy. The Trump administration is looking to position itself within the frame of responsible and non-wasteful spending, but studies have shown that the 2017 Trump tax cuts increased the deficit. It will be interesting to see if the new Trump administration will remain along the same line of thinking or if they will try a new approach to tax policy.
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