The Biden administration has proposed an array of corporate tax increases with a goal of raising some $1.33 trillion over the next 10 years. That’s three times the $409 billion that the Congressional Budget Office estimated was the cost of the 2017 corporate tax cut. To get a clear picture of who will pay these new taxes, Americans need to understand who benefited from the 2017 corporate tax cut.
Between the pandemic-induced recession and the years of slow growth following the 2008 subprime crisis, a brief respite of stronger growth and rising wages lifted America’s fortunes and spirits. Economic growth is generally viewed as some abstract concept, but when gross domestic product, which was projected in 2016 to grow by only 2.1% on average over the next three years, instead rose 3% in 2018, that small increase in growth made a huge difference to a lot of Americans.
The CBO responded to the increase in economic growth by adding $6.2 trillion to its 10-year GDP estimate—an extra $1,900 of annual income on average for every man, woman and child in America. The big difference this little bit of extra growth created was fully revealed in the census figures, when income growth in 2019 was the most broad-based and best ever recorded in a single year, and the poverty rate fell the most in a half a century.
Even the toughest critics of the tax cuts would grudgingly concede that the 2017 reduction in the corporate tax rate increased equity values. Despite the pandemic, the average value of the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite Index has doubled since the 2016 election when markets began to anticipate a corporate tax cut.
Who benefited from these gains? Numerous studies and polls show that more than half of American households own stocks, most through pension plans, 401(k)s, individual retirement accounts, mutual funds and annuities. Beyond the irrefutable benefits that flowed into retirement plans and annuities, critics never concede that corporate tax relief helped average families, much less low-income workers.
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