They were billed as a “middle-class miracle” but according to a new book Donald Trump’s $1.5tn tax cuts have helped billionaires pay a lower rate than the working class for the first time in history.
In 2018 the richest 400 families in the US paid an average effective tax rate of 23% while the bottom half of American households paid a rate of 24.2%, University of California at Berkeley economists Emmanuel Saez and Gabriel Zucman calculate in their new book, The Triumph of Injustice.
Taxes on the rich have been falling for decades. In 1960 the 400 richest families paid as much as 56% in taxes, by 1980 the rate had fallen to 40%. But Trump’s tax cuts – his most significant legislative victory – proved a tipping point.
Thanks to the controversial tax package the top 0.1% of US households were granted a 2.5% tax cut that pushed their rate below that of the lower 50% of US earners.
“This is a revolutionary change and the biggest winners will be the everyday American workers as jobs start pouring into our country, as companies start competing for American labor, and as wages start going up at levels that you haven’t seen in many years,” Trump said in September 2017 as he fought to pass the tax package.
But the tax cuts have not led to a significant uptick in economic growth, hiring has slowed and wage growth has remained lackluster. In the meantime the national deficit has swollen to $1tn.
The calculations of Saez and Zucman, who have previously worked with the French economist Thomas Piketty, take into account not just federal income taxes but also state, local and corporate taxes.
The pair argue that the dramatic fall in taxes for the ultra wealthy is the result of policies enacted by both Republican and Democratic administrations which have both cut top rates and taxes on capital gains while allowing corporations to shelter their profits overseas.