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Joint Economic Committee Democrats Chairman - Senator Martin Heinrich (D-NM)

Benefits of Republican Pass-Through Deductions Go Mostly to Wealthy

July 23, 2018

Weekly Economic Snapshot 7/23 - 7/28

Economic Facts for This Week

  • Extending all of the temporary provisions of the Republican tax law would mostly benefit the wealthy – 65 percent of the benefits in 2026 would go to the richest fifth of Americans.
  • One-third of American citizens would fail the new, harsher test the Trump administration hopes to use to restrict immigration.
  • Minorities are often steered toward housing in neighborhoods with less economic opportunity and higher crime and pollution, according to new research. Acting CFPB Director Mulvaney has taken actions likely to hamper fair housing enforcement actions.
  • Rigorous evidence shows that work requirements do not substantially increase long-term employment or decrease poverty, but instead result in eligible families not receiving the nutrition and medical assistance they need. This evidence runs counter to a report released from the White House last week advocating for stricter work requirements on programs like SNAP and Medicaid.

Chart of the Week

This week, House Republicans plan to reveal their Tax Cut 2.0 plan. It is widely expected that the plan will make the temporary provisions of the new tax law permanent, including the 20 percent deduction on qualifying pass-through income. The benefits of the deduction flow mostly to the wealthiest Americans, such as those that own large hedge funds, law firms, and real estate companies. While just 2 percent of the benefits in 2018 will go to households earning under $50,000 a year, 44 percent will go to households earning more than $1 million.

Tracking Trump’s $4k Promise

During the tax cut debate, the White House claimed that the average American household would see an income increase of $4,000 a year because of the tax cuts. Below are some indicators looking at whether or not Republicans are living up to their promise:

  • Average weekly wages for production and nonsupervisory workers are just 2 percent higher than they were before the new tax law, before accounting for inflation.
  • After adjusting for inflation, the average hourly wage for all workers was the same in June 2018 as it was in June 2017. For production and nonsupervisory workers, it actually decreased over this time period.
  • Meanwhile, stock buybacks are at record highs – with public companies announcing nearly $700 billion in stock buybacks in the first two quarters.

ICYMI

  • The Federal Reserve plays an important role in the health of the economy and the lives of workers and consumers. Find out more about the Fed in this JEC brief.
  • Ben Bernanke, Hank Paulsen, and Timothy Geithner – who all played a large role in the response to the 2008 financial crisis – are concerned about the ability of the United States to respond to the next economic downturn.
  • A new CAP proposal would boost pay for teachers – helping schools better attract and retain talented educators – for a tenth of the annual cost of the Republican tax law.
  • American markets now have less competition and higher concentration than European markets, a reversal from two decades ago.
  • Just 8 percent of single mothers who enroll in college complete a degree within six years, reflecting the additional burdens and costs that they face.

Coming This Week

Permalink: https://www.jec.senate.gov/public/index.cfm/democrats/2018/7/weekly-economic-snapshot-1-1-1-5

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