The Wages of Tax Reform Went to America’s Workers — and that’s why Trump’s Tax Cuts Should be Made Permanent

February 23, 2022

By Linda McMahon

By Linda McMahon in Real Clear Policy

With inflation at its highest rate since 1982, if Democrats really care about our Nation’s “working” class, they will support making the Trump tax cuts permanent. Before the passage of the Tax Cuts and Jobs Act (TCJA), anemic economic growth had become the new normal. Workers were permanently on the sidelines, and American manufacturing was a thing of the past. The message from the Obama White House was, in short: Get used to it. President Obama even said a “magic wand” didn’t exist to fix the economy.

But fortunately for workers across our country, President Trump’s tax cuts were exactly the magic wand our Nation’s economy — and their pocketbooks — needed. To help make a case for the dire need for tax reform, many of us in the Trump Administration traveled across the country to explain the economic benefits American families could expect from the tax cuts. Well, now, over 4 years in, and even with a worldwide pandemic, I’m pleased to report the Trump tax cuts fundamentally changed our economy for the better. And that’s why Congress should enact legislation to make them permanent — 57 percent of Americans support doing so.

As our nation faces the potential dual threat of stagnation and inflation, the Americans hit hardest are those who benefited most due to Trump’s tax cuts. By reducing the corporate tax rate from 35 percent to 21 percent, U.S. businesses and American workers were competitive again. Along with increasing investment in domestic plants and fully expensing equipment, we saw companies invest in workers instead of tax bills. It’s no surprise then that nearly 2 million workers entered or re-entered the workforce in 2018 alone — only 1 year after the tax cuts were enacted. These were the very same workers who had given up hope and left the labor force altogether during the slow recovery of the Obama years.

Instead of the government incentivizing workers to stay home by collecting federal money, workers were incentivized to get off the sidelines with the pro-work child tax credit expansion included in TCJA. This is in direct contrast to the Biden Administration’s recent proposal to strip any work requirements for this tax credit. By the end of 2019, a whopping three-quarters of those finding employment were joining the labor force from the sidelines. After years of stagnant wages, real wages increased 10 percent for blue-collar and middle-class workers. 

Families were also able to keep more of their hard-earned money. The Trump tax cuts nearly doubled the standard deduction for individual income taxes, which along with deregulation, led to real median household income increase by $4,400 in 2019 alone. The bottom 10 percent of the wage distribution saw real wages increase by 8.4 percent from December 2017 to the end of 2019. The bottom 50 percent of wage earners also saw real wealth increase by a whopping 28.4 percent during the same timeframe. Juxtapose that with the 7 percent inflation rate crippling American families today. The average working American is now hit with an $855 inflation tax hike in 2021, with low-income families and fixed-income seniors suffering the most.

Despite the pandemic-induced recession, the Trump Administration’s sound and prompt policy responses led to a V-shaped recovery, which the Biden Administration has replaced with storm clouds. In 2021, we saw real wages decline along with business investment. And again, the current White House is trying to convince people that high inflation and economic stagnation are just the new normal. It doesn’t have to be this way, and a good place to start to reverse this tide would be for Congress to make Trump’s tax cuts permanent. 

If the Democrats really care about American families and workers, they need to put good policy ahead of politics. Right now, that means making Trump’s tax cuts permanent.

Linda McMahon serves as Chair of the Board of America First Policy Institute (AFPI) and is the Chair of AFPI’s Center for the American Worker.