05/31/2019

CRS Report: Tax Law’s Impact was Minimal

Despite being touted as "rocket fuel," Trump's tax plan fell short

A new report from the nonpartisan Congressional Research Service (CRS) suggests the effects of the 2017 GOP tax law have been minimal.

The massive tax overhaul ushered through at the end of 2017 was touted by President Donald Trump this month as “rocket fuel for the American economy,” but the CRS reported last week that in 2018, gross domestic product (GDP) grew at 2.9 percent, which was about the projected rate published in 2017 before the tax cuts were enacted. “On the whole, the growth effects tend to show a relatively small (if any) first-year effect on the economy,” CRS said.

Real wages after the tax cuts grew more slowly than GDP, at 2 percent compared with 2.9 percent for GDP. While corporations benefited from the 21 percent corporate tax rate, “ordinary workers had very little growth in wage rates,” CRS said.

Congressional Democrats seized on the report as further evidence that the GOP tax law benefitted corporations and the wealthy at the expense of the middle class.

“Republicans made three unbelievable claims about their bill: It would pay for itself, raise wages by $4,000 and jumpstart investment in the United States,” said Senate Finance Committee Ranking Member Ron Wyden (D-OR). “In fact, the tax cuts are paying for just 5 percent of their cost – not 100 percent. Workers did not see a significant wage increase – the tax cuts largely paid for stock buybacks that push CEO compensation even higher. And the tax cuts have had a negligible effect on investment in the United States.”

House Ways and Means Committee Chairman Kevin Brady (R-TX), a key architect of the 2017 tax law, defended the law’s impact on the economy, pointing to a Bloomberg survey showing that U.S. consumer confidence about current economic conditions is the highest in 18 years.

This article was provided to OSAE by the Power of A and ASAE's Inroads.