Republicans may have a hard time coming up with anything Donald Trump has actually done—other than make it easier for companies to pour sludge into rivers and soot into the air—but the one thing that seems to appear on every GOP cheer list is the 2017 Republican tax bill. According to Trump, that tax is responsible for every good thing in the economy. According to Republicans, that tax bill is worth anything it takes to put up with Trump.
According to the nonpartisan Congressional Research Service, the benefits of that tax bill were in fact very, very obvious for corporations and billionaires. And very, very hard to find for everyone else.
Did the Republican tax bill spur economic growth? Well, the growth rate after the tax bill—2.9%—is exactly what the Congressional Budget Office projected before the tax bill. If the tax bill helped, the effect was either too minuscule to measure, or was so offset by other things Trump did that it all came out in the wash.
Did the tax bill spur investment? It did! Only … not the kind of investment that leads to more jobs, new factories, and improved products—more the kind of investment in stock buybacks that leads to higher stock prices, bigger CEO bonuses, and greater concentration of both wealth and control.
Did the tax bill pay for itself? Nope. No way. Not even close. In fact, it was an even bigger disaster than predicted. The Congressional Budget Office originally estimated that income from corporate income taxes would fall by $94 billion under the new plan. In fact, it fell $40 billion short of that target. The estimated average corporate tax rate fell from 23.4% in 2017 to 12.1% in 2018. Which is easy when several of the most profitable corporations in the whole country paid no tax at all under the new plan.
But surely some of that money trickled down? A trickle would be a generous description. Real wage growth for production and nonsupervisory workers was just 1.2%—far less than half of the change in GDP.
Corporations made much more money. The handful of people at the very top of the food chain saw millions in additional cash roll their way. But the average worker barely kept up with inflation, and the overall benefit to the economy was too small to measure.
The Joint Committee on Taxation estimated before the bill went into effect that its result would be a loss of $1.5 trillion over the next decade. But so far the bill is actually underperforming that number, driving toward an even deeper hole.
None of this has stopped the Trump White House from selling the tax bill as if it’s not only working for everyone, but completely paying its own way. In March, National Economic Council Director Larry Kudlow made exactly this claim, saying, “The Congressional Budget Office … their estimates before taxes and most recently after the taxes, they have argued, they have said, there’s roughly $7 trillion of higher nominal GDP, and from that comes about 1.2 trillion in extra revenues, so that the tax cuts are about 80 percent paid for overall.” Kudlow repeated that 80% number to both PBS and CNBC. A week later, he moved to just “almost completely,” which would seem to imply a number even higher.
As The Washington Post said way too kindly at the time, “that’s a bunch of spin.” As the CRS report points out, the numbers that Republicans predicted before passing their bill would have required the economy to roar along at 4.2% in 2018 rather than simply keeping on course at 2.9%. Rather than “almost completely” paying for itself, any increased growth generated by the tax bill was somewhere “less than 5%” of the cost of the bill. A 5% return on cost is also known as a 95% loss.
Or, as the CRS says bluntly, claims that the tax cuts would “produce so much growth that they would largely or entirely pay for themselves” were “not supported.”
The one thing that Trump accomplished was a big, big loser.