President Donald Trump’s tax cuts from his first term helped low- and medium-income earners more than high earners, a new study from The Heartland Institute found.
The conservative think tank based in Illinois examined Internal Revenue Service data from 2017, the year Trump signed the Tax Cuts and Jobs Act into law, through 2022, the most recent year that tax data is available.
While all income earners got lower rates, high earners paid a larger portion of the tax burden from 2018-2022 compared to 2017 when the tax law was not in effect, the study found.
The tax cuts are set to expire at the end of 2025, and Congress is set to debate the extension.
The study, titled, “Tax Cuts & Jobs Act: An Updated Study on the Effects of the Tax Cuts and Jobs Act on U.S. Personal Income Taxes,” asserted that millionaire taxpayers have had significantly fewer savings than those earning less than $50,000.
“Despite the widespread narrative that the tax cuts included in the Tax Cuts and Jobs Act disproportionately favor the wealthy, our analysis of hard IRS data tells a very different story,” Jack McPherrin, research fellow for the Glenn C. Haskins Emerging Issues Center at The Heartland Institute, said in a public statement.
“The evidence overwhelmingly indicates that lower- and middle-income households have received the largest tax cuts as a percentage of income, while higher earners actually took on a greater share of the overall tax burden,” McPherrin said.
The average tax filer in the income bracket of between $40,000 and $50,000 paid about 19% less in income taxes in 2022 than the average filer in the same income bracket paid before the passage of the tax reform law in 2017.
The study showed that filers in the tax bracket earning between $50,000 and $75,000 paid on average 16.58% less than filers in the same bracket in 2017.
Taxpayers filing in the bracket of between $75,000 and $100,000 paid about 11% less in 2022 than in 2017, the study found.
By contrast, the highest income earners had significantly fewer tax savings.
For example, filers with income between $5 million and $10 million paid only 2.3% less in 2022 compared to 2017, the Heartland study found.
In 2022 every income bracket earning less than $200,000 paid a smaller portion of the overall tax burden than they did in 2017, the study found. Meanwhile, every income bracket above $200,000 paid a larger portion, according to the Heartland study.
The study estimated tax filers with income between $75,000 and $100,000 saved an average of more than $6,300 since 2018, and filers in the income bracket of between $100,000 and $200,000 saved almost $13,500, according to the study.
The study further suggests there is more upward economic mobility since the tax reform. In 2019, bracket for incomes between $100,000 and $200,000 included approximately 2 million more filers than it did in 2017.
In 2017, IRS data showed total individual income tax revenue was $1.6 trillion. That dipped in 2018, but by 2022, total individual income tax revenues were more than $2.13 trillion.
“As Congress debates the future of the TCJA, it is critical to separate misinformed rhetoric from reality,” McPherrin added. “The data is clear: extending the TCJA’s personal income tax provisions would continue to benefit all Americans, with a disproportionately positive impact on working class Americans. If the TCJA’s provisions are not extended, those who can least afford the resulting tax rate hikes will suffer the most, with many paying thousands of dollars per year in additional taxes.”
