In a January 4, 2018 news release after signing the Tax Cuts Jobs Act (TCJA), Sen. Joni Ernst stated, “We should have a tax system that encourages investment, boosts middle- and low-income earners, and helps our struggling families.” After a year under the new TCJA, nothing could be further from the truth. As was suspected at the time the bill was quickly rammed through the Republican-controlled Senate and House, this bill is nothing more than a benefit for the wealthiest in America and those in the middle are not seeing the benefits.
In 2018, capital was taxed less than labor for the first time in modern history. Why does this matter? Because the wealthiest Americans are profiting from their own wealth: stocks, companies, and real estate. The TCJA which dramatically slashed taxes on corporate profits and on estates helped with this shift. Americans in the bottom 90 percent derive 85 percent of their income from labor, while those in the top 1 percent get more than half of their income from capital.
Under the TCJA, the wealthiest 1% have prospered the most as the wealth inequality gap continues to widen. Billionaires paid 23% of their income in federal, state, and local taxes in 2018, while the average American paid 28%.
The TCJA, which Ernst supported, was not a plan to help the middle class and now the numbers support what Americans feared would happen. The 1% is gaining more wealth and those in the middle are paying the price.