Economic Snapshot | Budget, Taxes, and Public Investment

Locking in further regressive tax cuts would just make the TCJA worse

The House is set to vote this week on a second round of tax cuts that Republicans have dubbed “Tax Reform 2.0.” The first Republican tax cut, the Tax Cuts and Jobs Act (TCJA), was incredibly regressive with the worst component being a corporate rate cut that Republicans chose to make permanent. We said at the time that arguments that corporate rate cuts would trickle down to typical workers were bunk. And so far there is little evidence to suggest anything different.

Now House Republicans are hoping to solve a political problem—the unpopularity of their signature tax cut in 2017—by centering a second round of tax cuts on making the individual cuts in the TCJA permanent to achieve parity with the already-permanent corporate rate cuts. Republicans are marketing this as a tax cut for the middle class, but it’s nothing of the sort.

Figure A

The second round of Republican tax cuts are still tilted towards the top: Share of total federal tax change by income quintile, 2026

80-90 90-95 95-99 Top 1 Percent
Top 12.40% 10.10% 24.40% 16.20%
Fourth 18.80%
Middle 12.30%
Second 6.30%
Bottom 1.60%
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Source: Analysis of the Protecting Family and Small Business Tax Cuts Act of 2018, Tax Policy Center, September 12, 2018.

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While the TCJA’s individual tax cuts may be less tilted towards rich households than the extremely regressive corporate tax cuts, these individual cuts are still awfully regressive in their own right. According to the Tax Policy Center, the bottom 60 percent, households making under $95,000, would get just 20.2 percent of the benefits. While the top 20 percent, households making over $168,600, would receive 63.0 percent of the benefits.

Locking in further regressive tax cuts won’t fix the TCJA, it will only exacerbate its deep flaws. Congress should reject this second round of Republican tax cuts for the rich.


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