Sen. Joe Manchin says he supports repealing the Trump administration tax cuts that were passed at the end of 2017.
This is surprising because Manchin has stood up for West Virginia taxpayers against the Democratic Party-Biden Build Back Better plan that would raise taxes on working families and small businesses. By supporting the repeal of former President Donald Trump’s Tax Cuts and Jobs Act, however, Manchin borrows the rhetoric of Sen. Bernie Sanders, Rep. Alexandria Ocasio-Cortez, and the radical Left. He claims that this tax increase will make the wealthy and large corporations “pay their fair share.”
But while promising to tax “only the rich,” repealing the tax cuts would raise taxes on working families in West Virginia and across the country. Thanks to the Trump tax cuts, middle-income West Virginia households saw a greater tax cut as a percentage of their taxes than millionaires, according to Internal Revenue Service statistics of income data. Based on this data, the average West Virginia taxpayer with an adjusted gross income of between $25,000 and $50,000 had a federal income tax liability of $2,190 in 2017. In 2019, the average tax liability of taxpayers in this income threshold was $1,783, a 26% reduction in tax liability.
The average taxpayer making between $50,000 and $75,000 saw their tax liability drop from $5,348 in 2017 to $4,268 in 2019, a 25% reduction in federal income tax liability. Taxpayers with adjusted gross income between $75,000 and $100,000 saw their average federal income tax liability drop from $8,720 in 2017 to $7,064 in 2019, a 23% reduction in federal income tax liability. In contrast, taxpayers reporting $1 million in income or more saw their tax liability drop by just 2.9% between 2017 and 2019. These findings should not be surprising.
Data from the Congressional Budget Office found that the Tax Cuts and Jobs Act actually made the tax code more progressive. The year before the tax cuts went into effect, 2017, the top 1% of wage earners paid 38.6% of income taxes, while they paid 41.7% of income taxes in 2019. Biden, Sanders, and the envy-driven politicians were wrong.
The tax cuts led to employers hiring, expanding, raising pay, and increasing employee benefits for workers across the country, including in West Virginia, while hundreds of investor-owned electric, gas, and water companies in every state responded to the tax cuts by reducing rates for households. The law also helped create the strongest economy in modern history.
Thanks to the tax cuts, the unemployment rate dropped to 3.5% in 2019. The best in 50 years. In the same year, median household income increased by $4,440, or 6.8%, the largest one-year wage growth in American history. This one-year increase in wages dwarfed the growth experienced during the entire eight years of Barack Obama’s presidency: just 5%. The bottom 25% of wage earners also experienced wage growth faster than the top 25% of wage earners, according to the Atlanta Fed.
Repealing the policies that led to such significant economic benefits would be especially dangerous in the current tumultuous, weak state of the economy.
Inflation has spiraled out of control and increased the fastest since 1982. The average U.S. household spent $3,500 more in 2021 due to inflation, as found by the Penn Wharton University of Pennsylvania Budget Model analysis. Low-income households were disproportionately harmed, as those households will spend about 7% more, while higher-income households will spend about 6% more.
Manchin is right to recognize that the economy is struggling and that inflation is harming families. However, he should recognize that repealing the Trump tax cuts would make things even worse.
Grover Norquist is president of Americans for Tax Reform.