Trump State of the Union Tax Claims Fact Check: Are President's Cuts the Largest in History?

GettyImages-897241798
President Trump holds up the signed tax bill. Getty Images

President Donald Trump claimed that the $1.5 trillion Republican tax plan provided tremendous relief for middle-class families at Tuesday night's State of the Union.

"Just as I promised the American People from this podium 11 months ago, we enacted the biggest tax cuts and reform in American history," the president said to thunderous Republican applause. "Our massive tax cuts provide tremendous relief for the middle class and small businesses.

"Since we passed tax cuts, roughly three million workers have already gotten tax cut bonuses–many of them thousands of dollars per worker," he continued.

These claims, however, are greatly embellished.

Trump initially promised a "massive" 35-percent tax cut for America's middle class, but the final bill lowered taxes for middle-income earners by about 10 percent and only for eight years, as they are set to expire in 2025.

"This will be fantastic for the middle-income people," the president told a group of reporters before leaving for Camp David in December, echoing a sentiment expressed over the course of his presidential campaign and throughout his first year in office.

Middle-income Americans will benefit by around $1,000 initially, according to the Tax Policy Center, a nonpartisan think tank based in Washington, D.C. But by 2027, the majority of middle-class households would get no tax cut, and some would actually pay more.

That's because all individual tax cuts are set to expire after 2025, meaning that the majority of Americans making less than $200,000 will see little change in their tax bill or a tax increase in 2027.

GettyImages-897241798
President Trump holds up the signed tax bill. Getty Images

Instead, high-income Americans will receive the bulk of the cuts. The bill cuts the top income tax rate and the alternative minimum tax, which ensures that the ultra-wealthy pay at least a little to the Internal Revenue Service each year. The rate cuts for pass-through businesses, the corporate rate cut and the estate tax exemption also aid the richest Americans.

The largest cuts as a share of income will go to taxpayers in the 95th to 99th percentiles of income distribution.

Trump's chief economic adviser and director of the National Economic Council Gary Cohn, has said that the tax cut would benefit middle-income Americans through trickle-down economics. "We create wage inflation, which means the workers get paid more; the workers have more disposable income, the workers spend more," he told CNBC's John Harwood last November. "And we see the whole trickle-down through the economy, and that's good for the economy."

The "rising tide lifts all boats" idea remains a popular GOP theory, namely that a tax cut for the very rich creates indirect benefits for middle- and lower-class Americans. The more money the very wealthy have, the more they spend, and spending creates jobs.

But past evidence has shown it doesn't always work that way. America's rich are as wealthy as they've ever been, and yet the gap between the wealthy and poor continues to grow.

The biggest tax cuts in American history

The president has claimed that the Republican tax plan is the largest in history, but that's only a possibility if corporate cuts are included in the calculation.

Economists estimate that the final tax bill will cut federal tax revenue by about one percent of the gross domestic product per year. That makes it the eighth largest tax cut since 1918, when measured by GPD.

President Obama's "American Taxpayer Relief Act," signed in 2013, cemented a tax cut nearly two times larger than what Trump is proposing.

When Trump says that this is the largest tax cut in history, he is including corporate tax cuts, which don't directly benefit everyday Americans.

3 million workers have already gotten tax cut bonuses

White House economic advisor Gary Cohn has said that Trump arrived at the 3 million workers by looking at "some type of tax bonus or wage increase or pension increase," and that more than 350 companies have made "announcements in direct reflection of what we've done with taxes."

While this appears to be true, that's only about two percent of the 154 million American workers. According to the Labor Department, about 38 percent of workers were expecting some form of bonus in 2017 with or without tax legislation.

Trump State of the Union Tax Claims Fact Check: Are President's Cuts the Largest in History? | U.S.