Director of Federal Fiscal Policy
Treasury Secretary Steven Mnuchin said this week that the Trump Administration would like to “make the middle-class tax cuts permanent,” presumably referring to the 2017 tax law’s individual tax provisions, most of which are set to expire after 2025. But they’re not “middle-class tax cuts”: extending them, as many Republican lawmakers also favor, would raise after-tax incomes by more than twice as much (in percentage terms) for the top 1 percent of households as the bottom 60 percent, we estimate based on Tax Policy Center data. Extending them also would double down on the law’s three core flaws, providing another tax bill that’s skewed to the wealthy, fiscally irresponsible, and encourages rampant tax gaming and avoidance:
Extending the provisions would also violate Secretary Mnuchin’s promise soon after candidate Trump’s 2016 victory that “[t]here will be no absolute tax cut for the upper class” in a tax bill by delivering roughly $33,000 in annual tax cuts to the top 1 percent after 2025.
Instead of doubling down, policymakers should set a new course and deliver true tax reform that avoids the 2017 law’s regressivity by benefiting low- and moderate-income working people far more, raises revenue to meet national needs, and improves economic efficiency by strengthening the integrity of the tax code.