Over the last 50 years, Congress has passed four major bills that cut taxes: the 1981 Reagan tax cuts; the 2001 and 2003 George W. Bush tax cuts; and the 2017 Trump tax cuts. Each time, President Reagan, President Bush, President Trump, and their congressional allies made the same three main arguments in favor of the tax cuts:
1. The tax cuts would pay for themselves.
2. The tax cuts would supercharge economic growth, create millions of jobs, and dramatically raise wages.
3. The tax cuts would benefit everyone.
This legislative retrospective examines these three claims, none of which have proven to be accurate.
Rather than paying for themselves, the Reagan, Bush, and Trump tax cuts each significantly increased the federal deficit. In total, tax cuts have added over $10.4 trillion to the federal deficit since 1981 compared to the Congressional Budget Office’s baseline projections.
Rather than growing, the economy shrank after passage of the Reagan tax cuts and unemployment surged to over 10%. Following the enactment of the Bush and Trump tax cuts, the economy did grow marginally, but at rates much lower than their supporters predicted. Over the last 50 years, the economy performed best during the Clinton presidency, which saw 3.9% real annual growth, robust wage increases, and booming private investment. Notably, this economic success followed tax increases, not tax cuts.
And rather than benefiting everyone, the savings from the Reagan, Bush, and Trump tax cuts flowed predominantly to the richest Americans. The average tax cut for households in the top 1% under the Reagan tax cut ($47,147) was 68 times larger than the average tax cut for middle-class households ($695). The Bush and Trump tax cuts similarly provided their greatest benefits to the wealthy, with households in the top 1% receiving tax cuts 16 times (Bush tax cuts) and 36 times (Trump tax cuts) larger than middle-class households. As a result, the tax cuts helped fuel the growing income and wealth inequality America has experienced over the last 50 years.
