America’s rich have gotten richer for decades, while the middle class and poor have seen meager gains. Since the mid-20th century, the top 1 percent have more than doubled their share of the nation’s income, from less than 10 percent to more than 20 percent.
Donald Trump said he was going fix it — that he would represent the forgotten men and women, the people who had been left behind in this widening of income inequality.
But the tax overhaul his Republican Party passed through the Senate early Saturday morning would make America’s income inequality worse. Maybe a lot worse, economists say.
“The bill is investing heavily in the wealthy and their children — by boosting the value of their stock portfolios, creating new loopholes for them to avoid tax on their labor income, and cutting taxes on massive inheritances,” Lily Batchelder, a New York University professor who worked as an economist under President Barack Obama, said. “At the same time, it leaves low- and middle-income workers with even fewer resources to invest in their children, and increases the number of Americans without health insurance.”
The centerpiece of the Republican tax plan is a massive corporate tax cut, from 35 percent to 20 percent, which is expected to disproportionately benefit the wealthy. Shares of stock in the businesses that pay corporate income are mostly owned by the wealthy, and the top executives whose compensation packages are linked to stock market performance are also much richer than the average American. So the bill’s cut in the corporate tax rate is going to help them the most.
It would also overhaul the individual tax code in a way that almost every independent analysis has shown would direct most of the benefits to the wealthy. In 2019, a person in the bottom 10 percent gets a $50 tax cut and a person in the top 1 percent gets a $34,000 tax cut.
Other provisions, like rolling back the estate tax, are unambiguous giveaways to the richest Americans.
“It exacerbates preexisting and longstanding trends, rather than aiming to partially compensate for them,” William Gale, co-director of the Tax Policy Center who served as a senior economist under President George H.W. Bush, said.
At the same time, millions of poor and middle-class people are expected to see their taxes either stay the same or actually increase in the long run. Right away, the groups getting the biggest cuts are toward the top of the scale, according to the nonpartisan Tax Policy Center: