The Tax Cuts and Jobs Act of 2017 Favors Corporations And The Wealthy Over Working Montanans
The Tax Cuts and Jobs Act of 2017 (TCJA) created the most significant changes to tax law in the United States in more than 30 years. The law included permanent corporate tax cuts and temporary individual income tax cuts. Its 80-plus provisions, however, disproportionately benefit the wealthy and corporations rather than working people in Montana.
The Missoulian compiled data available from the Montana Department of Revenue to create a comprehensive examination of the effects of the tax law on Montanans. Consider the following data from tax year 2018 and note a crucial fact: wealthier taxpayers benefited more from law than their less wealthy counterparts – and the wealthier the taxpayer, the more the taxpayer benefited from the law.
Those taxpayers in the very top income bracket benefited most from the law. As a result of TCJA, the 296 taxpayers in Montana who earned more than $2 million per year, paid a combined total of $532.5 million in taxes. Estimates show, however, that without the 2017 law, those same people would have owed almost $600 million combined in taxes.
As a result of TCJA, Montanans in the top 3.4 percent of income earners kept a combined amount of almost $359 million more in federal income taxes. On average, the 15,709 people who make up that top 3.4 percent saved $22,837 in federal taxes.
In other words, the wealthiest 3.4 percent of Montanans received almost 41 percent – or $359 million – of the total savings on taxes, while the remaining 96.6 percent of people in the state only divided the other 59 percent – or $524 million.
The approximately 47,000 Montana taxpayers who earned less than $7,061 per year only saved an average of $154 due to the law. On the other hand, someone earning between $155,000 and $217,000 saved nearly $5,000 on average.
Corporate tax cuts – breaks for companies, not relief for working people – comprised the cornerstone of the 2017 law, and corporations and the wealthy outside of Montana benefited from the law rather than the working Montanans who need relief. The law cut the corporate tax rate from 35 percent to 21 percent and shifted the system closer to what’s called a “territorial tax system,” which makes certain foreign income of multinational corporations exempt from U.S. taxation.
At the time of passage of the law, some experts and advocates said the cut in the corporate tax rate included in the law would lead to an increase in household income. Since implementation of the law, the Joint Committee on Taxation and the Federal Reserve Board have studied the effects of the law. They found that this claim has not held up. Instead, as the Center on Budget and Policy Priorities notes, the study found that “workers below the 90th percentile of their firm’s income scale” – those with incomes below approximately $114,000 in 2016 – did not see a change in earnings as a result of the rate cut. On the other hand, the study found that workers in the top ten percent did see an increase in earnings and that the increase was particularly pronounced for managers and executives.
When looking at another central component of the law, changes to the estate tax – the tax on someone’s property when they die – it is clear that yet again, the law did virtually nothing for working Montanans. Only 20 estates in Montana were wealthy enough to benefit from TCJA’s estate tax cut. Meanwhile, wealthier states such as California and New York, had 1,230 and 420 estates that benefitted, respectively.
Finally, shareholders and high-paid workers benefited more from the law’s corporate tax cuts than non-shareholders and lower paid workers, and these individuals are often located in high-income geographic areas such as the West Coast and the Northeast. Once again, working Montanans lose out while the very wealthy and large corporations in other already wealthy regions get richer.
More than six years after passage of the Tax Cuts and Jobs Act of 2017, it is clear that the law primarily benefits the wealthy and corporations, not working Montanans.
