Turns Out Extending the Costly, Unfair Trump Tax Cuts Won’t Even Help the Economy

The last plausible-sounding argument for why we should extend all the expiring parts of the 2017 Trump-GOP tax law recently expired itself.

By William Rice

The last plausible-sounding argument for why we should extend all the expiring parts of the 2017 Trump-GOP tax law recently expired itself. The Congressional Budget Office (CBO), a neutral scorekeeper, has determined that making the cuts permanent—the goal of the incoming Republican government—would lead to lower economic growth over the next 10 years compared to letting them sunset on schedule at the end of 2025. With the “boost to the economy” talking point refuted, the only reason for extending all the cuts is the one that the GOP doesn’t like to say out loud but is the party’s real motivation: it will give trillions of dollars more to their already rich political donors.

Trump and his followers have tried to convince the American people that the original law and its extension would mostly help working families. But that fantasy is quickly dispelled when the public learns that a few years after the law went into effect, middle-income households got less than three dollars a day in tax cuts while the highest-income 1% received almost $50,000. And nearly the identical tilted-to-the-rich breakdown of cuts would be true in the first year of extension. 

Apologists for the 2017 tax cuts have long maintained that they would somehow “pay for themselves”—as if the laws of mathematics didn’t apply and you could reduce your income and still not be out any money. The CBO has run the numbers and found the original Trump law has in fact added $2 trillion to the nation’s debt and its extension would add another $5 trillion. All that extra red ink threatens funding for crucial public services working families rely on, including Social Security and Medicare. 

Undeterred, the law’s backers talk up the supposed broad-based benefits of individual components that are set to run out at the end of next year. One of those provisions is the “pass-through loophole,” which allows noncorporate businesses to subtract a fifth of their earnings before figuring their taxes. Republicans like to call this a “small-business tax cut” but the reality is that in 2019 almost two-thirds of the cut went to business owners with over $400,000 of income and more than half went to owners with income over a million dollars. The average small business owner makes about $55,000 a year. 

The GOP always likes to attack the estate tax, because it is the only federal curb on the creation of economic dynasties that tend to back Republican politicians. The 2017 Trump law continued a decades-long weakening of the tax by doubling the amount of family fortune exempt from it. In 2025, after years of inflation adjustments, the inheritance that super wealthy couples will be able to pass along to their lucky heirs without a penny of estate tax paid will be $28 million. The median net worth of an American family is under $200,000. So a weaker estate tax does nothing for average households except lose a lot of money—$167 billion over 10 years—that could otherwise be invested in healthcare, education, housing and other services that are particularly important to everyone not slated to inherit a fortune.

So even though the tax cuts are mostly for the rich, which widens economic inequality and increases economic instability; even though they will add trillions to the national debt, thereby endangering funding of public services; even though chief components of the law overwhelmingly aid wealthy business owners and family dynasties—still, its proponents argued that all those sacrifices produced a more robust economy. Perhaps now we can stop pretending because it’s even more clear that their tax cuts for the wealthy will actually harm the economy. 

Some parts of the law that actually help working families are also set to expire—like the expanded Child Tax Credit—and should be preserved with separate legislation. But with no more good reasons left to extend their life, the bulk of the expiring Trump tax cuts which overwhelmingly benefit the rich and big corporations should be allowed to die a natural death.