Biden Misleads about GOP Tax Cuts

I f he didn’t lie, in his first State of Union address, President Biden at least misled. The target of the mendacity? The economic effects of the 2017 Tax Cuts and Job Act. If you listen to the president’s speech, you’d think that the 2017 tax legislation’s passage presaged a widening of inequality and a decline in middle-class wages. But the opposite, in fact, happened. A “trickle-down” tax bill passed in 2017. Then, inequality declined and middle-class incomes rose.

“For the past 40 years we were told that if we gave tax breaks to those at the very top, the benefits would trickle down to everyone else,” President Biden said. Among the maladies he then laid at the feet of “trickle-down theory” were “lower wages” and “the widest gap between those at the top and everyone else in nearly a century.” He didn’t need to name the 2017 tax bill for it to be discerned as among his targets. The legislation typifies the school of thought that critics call “trickle-down” and supporters call “supply-side.”

I served at the Council of Economic Advisers of the Trump White House when we passed the tax cuts in 2017. We called them supply-side. The next day, a critic pilloried our case for the 2017 cuts as “trickle-down” that amounts to “nonsense” in the opinion section of the New York Times. If any one thing looms in recent memory as the embodiment of the trickle-down policy lambasted by President Biden, then, it’s the 2017 tax overhaul.

If President Biden’s speech is to be believed, you’d expect increases in inequality and declines in middle-class wages to have followed the 2017 legislation’s passage. Instead, as the chart shows, inequality declined. Middle-class wages rose. While the pandemic then disrupted economic trends in 2020, until 2019, this was the case. The chart’s measure of middle-class wages rose between both 2017 and 2018 and between 2018 and 2019. Its measure of income inequality fell between both 2017 and 2018 and between 2018 and 2019. If President Biden’s characterization of this type of policy were accurate, you would expect to observe the exact opposite pattern in the data.

The chart, however, understates the richness of this tale of taxes and America’s middle-class. Published in February of 2018, one set of numbers, from a think tank defended by one of the tax law’s loudest critics in October of 2017, indicates that 80.4 of Americans received tax cuts because the legislation then passed. Among those with incomes in the middle-class range of $50,000 to $75,000, 91.6 percent of taxpayers received a tax cut. Those are the actual effects of a tax law that the president of the United States, as he did in the 2022 State of the Union, now recounts as a story of tax cuts only for “the very wealthy and corporations.”

Biden’s misrepresentation of the economic consequences of the 2017 Tax Cuts and Job Act is, if the reporting of the New York Times is to be believed, a banality. “A sustained — and misleading — efforts by liberal opponents of the law,” according to reporting in the New York Times, has resulted in a “gap between perception and reality on the tax cuts.” The novelty lies only in the State of the Union’s role as the latest stage for this “sustained and misleading” effort.