April 15th, 2019 marked the end of the first filing season under the new tax code. Now that taxes have been filed, many people are wondering: did the GOP tax bill live up to its promises? Did the tax bill actually give all the benefits Americans were promised? In this post, our experts here at Tax Defense Partners take a look at some of the top promises the GOP made about the new tax bill and see whether or not they were kept.
Promise #1: The Tax Bill Will Benefit the Middle Class
Most Americans did get a tax cut under the new tax code (65% of Americans did, to be exact). But how did the middle class fare in the tax cuts? As a whole, pretty well. According to data from the Tax Policy Center, 82% of middle class earners received a tax cut, while 9% paid more and another 9% paid roughly the same amount. So while not all middle class taxpayers benefited from the tax bill, the majority did.
Was This Promise Kept?: Mostly Yes
Promise #2: The Tax Bill Will Increase Wages by $4,000 on Average
A big talking point of President Trump’s was that the average American would see about $4,000 more annually because of the tax cut. This, unfortunately, did not come to be. However, wages in general rose 3% in 2018 (up from 2.6% in 2017) and some economists do estimate that the tax bill could have been a factor in this. While a 3% increase in wages is well below $4,000 for almost all Americans, it’s still good news.
Was This Promise Kept?: No, But Wages are Rising
Promise #3: The Bill’s Tax Cuts Will Pay for Itself
While the White House was adamant that the tax cuts would pay for themselves, most economists were adamant that they would not. So did they? This one is easy to answer: no. In fact, tax receipts are down and the Committee for a Responsible Federal Budget estimates that the tax bill will account for $230 billion of this fiscal year’s estimated $900 billion deficit.
Was This Promise Kept?: No
Promise #4: The Tax Bill Will Cause a Capex Boom
Capex is short for capital expenditures, which is a term for investments businesses make in themselves. Capex can include things like new buildings, research projects, equipment, and technology. So is Capex booming after the tax cuts? According to data collected by the Bureau of Economic Analysis, Capex did sharply increase immediately after the tax cuts were enacted. However, it seems to have then gone back to normal shortly afterward.
Was This Promise Kept?: For a Short Period of Time, Yes
Promise #5: Money Will Come “Flooding” Back from Abroad
The new tax code cut the rate on repatriated money, which President Trump said would cause cash to “flood” back into the US. While some money has come back (according the US government, $665 billion of the $3 trillion projected to be overseas), not all of it has. However, some experts say that this is because companies who have money overseas are still deciding when, how, or if they will bring money back into the US.
Was This Promise Kept?: Too Soon to Tell
Promise #6: The GDP Will Be 3% or Higher
President Trump has stated that the new tax code would result in a GDP of 3% or above. And in 2018, this did happen, with a 2.9-3.0% GDP (depending on how it was calculated). Trump has also stated that this GDP will continue in the years to come, but economists are skeptical. Most economists have estimated that the next year’s GDP will be much closer to 2% than 3%.
Was This Promise Kept?: For 2018, Yes. Beyond That, Time Will Tell.
Promise #7: Your Taxes Will “Fit on a Postcard”
Finally, let’s look at a promise that was very attractive to most Americans: that their taxes would “fit on a postcard.” Unfortunately, this promise did not become a reality. While the 1040 shrunk slightly, it was mostly because much of the information on the page was shuffled to another form, which taxpayers still had to use. Additionally, the main tax form instructions were extended in length by ten pages.
While this one didn’t come true, many tax experts have noted that most Americans probably didn’t notice, as most taxpayers use a tax preparer or some sort of online software to fill out their forms for them.
Was This Promise Kept?: No