TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Monday, October 15, 2018

White Americans Gain The Most From Trump’s Tax Cuts

New York Times, White Americans Gain the Most From Trump’s Tax Cuts, a Report Finds:

The tax cuts that President Trump signed into law last year are disproportionately helping white Americans over African-Americans and Latinos, a disparity that reflects longstanding racial economic inequality in the United States and the choices that Republicans made in crafting the law.

The finding comes from a new analysis of the $1.5 trillion tax cut using an economic model built by the Institute on Taxation and Economic Policy, a liberal think tank, and released in a joint report with Prosperity Now, a nonprofit focused on helping low-income Americans attain wealth and financial stability [Race, Wealth and Taxes: How the Tax Cuts and Jobs Act Supercharges the Racial Wealth Divide]. It is the first detailed analysis of the law to break down its effects by race.

White Americans earn about 77 percent of total income in the United States, but they are getting nearly 80 percent of the benefits of the individual and business tax cuts generated by the new law, the analysis found. African-Americans received about 5 percent of the benefits, despite earning 6 percent of the nation’s income. Latinos got about 7 percent, although their share of all income is 8 percent.


In total, the analysis estimates, whites will get $218 billion in tax cuts this year as a result of the law. Black and Latino Americans will get about $32 billion combined.

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The last pages of the "study" admit this is playing up white taxpayers' rates being 0.1% less higher than average - and Asian taxpayers' being 0.2% less higher than average - after the new law.

While we're supercharging employment, wages and GDP by one full percentage point after another for ALL Americans. Woohoo!

Posted by: Anand Desai | Oct 15, 2018 5:57:31 AM

This is not a very illuminating analysis, at least judging from the executive summary, which did not inspire me to wish to read more. The observation that distributional effects which favor the wealthy are likely also to favor white families, because they are wealthier, is accurate as far as it goes, but is simplistic enough that it does not require a study to back it up.

The interesting questions, which this “study” does not seem to have addressed (again, based on the executive summary), would revolve around whether the other distributional effects of the Tax Act reinforce or mitigate the racial impact of handing out large benefits to the wealthy. For instance, the Act disproportionately benefits wealthy developers and owners of manufacturing and (to a lesser extent) technology businesses by comparison to wealthy owners of professional service businesses. Does the racial composition of those two classes of wealthy persons differ, and how does this affect the impact of the Act at different levels of income? The Act also disproportionately benefits wealthy persons living in lower-taxed, rural and exurban, and midwestern and western localities by comparison to wealthy persons living in higher-taxed, urban and suburban, and coastal localities. Does the racial composition of those classes of wealthy persons differ, and how does this affect the impact of the Act at different levels of income? The Act likewise has disproportionate impacts on businesses in the same industry depending on how they operate across international borders, which might well have a differential impact by race.

It would be useful (and would make the study’s conclusions more credible and its computations less trivial) to see an analysis of the carefully calculated distributional choices made by Congress in the Act, rather than a simplistic observation about existing wealth distribution.

Posted by: Matt | Oct 15, 2018 7:55:32 AM