Speaking before the Joint Economic Committee on Wednesday, Erik Paulsen (R-Minn.) reiterated his support for the Republican tax plan that was approved last year.
“Consumer confidence is up, Americans are seeing more take-home pay, many will spend less time preparing their taxes next year, and businesses are paying special bonuses, giving their employees a raise, repatriating offshore earnings, and investing more in the United States again,” Paulsen said in his opening remarks before the committee, which he chairs. “We are in a better place every day as this economy has moved upwards, and it is not because ‘government’ fixed it. It’s because government finally allowed the American people to fix it.”
But economists have suggested that the tax plan will have serious negative impacts. By cutting the corporate tax rate from 35 to 21 percent, the bill adds $1.5 trillion to the federal deficit over the next decade. And while most Americans will see at least some boost in their after-tax earnings over the next several years, those tax cuts expire in 2025. (The corporate tax cuts, by contrast, are permanent.) According to the non-partisan Congressional Budget Office, that means that every American earning less than $75,000 per year will pay more in taxes by 2027.
These long-term effects have congressional Democrats worried, too. Sen. Martin Heinrich of New Mexico, the ranking Democrat on the Joint Economic Committee, said he was less “optimistic” than Paulsen about the tax plan.
“I’m going to be pretty direct,” continued Heinrich. “The tax bill serves special interests and will cost our children dearly for generations. The GOP tax law … jeopardizes our fiscal condition and further tilts the scale in favor of large corporations and especially wealthy individuals. While the law’s impact on economic growth is debatable, the impact on inequality is clear.”
Indeed, the Tax Policy Center has found that 83 percent of the tax cuts in 2027 would go to the top one percent of income earners in the country, and economists broadly agree that the tax bill will exacerbate income inequality.
While Paulsen is right that consumer confidence is high, it’s not at an all-time high. According to the University of Michigan’s consumer sentiment index and the Conference Board’s consumer confidence index, consumer confidence was higher for most of the Clinton administration’s second term.
And as I wrote last week, the bonuses being distributed by some companies are paltry compared to the much larger share of tax savings that companies are pouring into stock buybacks and dividends. Overall, only 13 percent of the savings companies have collected through the tax bill are being invested in workers’ wages, benefits, or bonuses.
Featured image via YouTube.