The Tax Bill Benefitted All Pennsylvanians. Will that Matter on Election Day?

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In a year with an assembly line of tumultuous events, few have cited taxes as a major presidential campaign issue — until the recent debates. 

But after months of economic uncertainty, financial security is on everyone’s mind. “It’s the economy, stupid” has been the most reliable election fundamental since 1992. This year, both candidates hold significantly differing views on their idea of prosperity. And taxpayers won’t let media-fueled chaos distract from that reality either.

Joe Biden, the Democratic nominee, has promised to fully repeal the 2017 federal tax cuts that benefited most Americans. At the same time, Biden claims his plan will only raise taxes on those earning more than $400,000. Even if you believe his economic math adds up, the two statements are incompatible.

The latest report on who benefited from President Donald Trump’s tax cuts was released in Pennsylvania, the ultimate election battleground, where the state’s non-partisan Independent Fiscal Office reviewed data on actual tax returns filed by families. The report broke down taxes paid by filers earning less than $75,000; those earning between $75,000 and $200,000; and those earning more than $200,000.

According to the report, all three income categories saw their tax burden fall from 2017 to 2018. Notably, the lowest income group saw a greater percentage tax cut than the highest income groups. Those with incomes less than $75,000 had, overall, an 18.8% tax cut; those with incomes above $200,000 had a 10.1% tax reduction.

These reforms maintained a progressive tax structure for federal income taxes. The “final average tax rate” for Pennsylvania taxpayers earning less than $75,000 was 5.1%, compared with 20.4% for the highest income group.

Not only were taxes lowered, but they were also simplified. Far fewer had to fill out the long form for itemized deductions in 2018. Overall, itemized reductions were 60% lower in 2018 than 2017. Long story short, the tax reform saved Pennsylvania families both time and money. That will matter on November 3.

Despite the avalanche of claims that the 2017 tax cuts mostly benefited the rich, they actually capped the deductions that the very wealthy could claim. High-income taxpayers, for example, can no longer easily write off State and Local Tax (SALT); their average SALT deduction dropped from $32,291 to $9,566 from returns filed in 2018 to 2019. Looking to court favor in high tax cities in high tax states, congressional Democrats now want to uncap this deduction.

Perhaps the most striking impact of the tax cuts involves salaries. In 2018, there were more Pennsylvanians earning over $200,000, more earning $75,000 to $200,000, and fewer earning less than $75,000. Post-tax reform, Pennsylvanians are generating more income.

This trend is reflected in new Census data showing household income on the rise and poverty falling. In 2019, median household income nationwide rose to $68,703 — the highest level ever recorded, even after adjusting for inflation. Likewise, according to the Census, “the 2019 poverty rate of 10.5% is the lowest rate observed since estimates were initially published for 1959.”

To be sure, these numbers preceded the COVID-19 pandemic and economic lockdowns, which devastated job growth and earnings. Pennsylvania hit its lowest unemployment rate ever in 2019, but then skyrocketed to its highest unemployment rate in 2020 after Gov. Tom Wolf’s business closure order.

But even with the COVID recession, most Americans enjoy more prosperity than before. As a recent Gallup poll found, 56% of voters say they are better off than four years ago. 

Of course, there’s far more involved in the 2020 election than the economy and pocketbook issues. With two weeks left before Election Day, voters are inundated with breaking — and chaotic — news developments.

But this cycle could lead pundits to miss the obvious: jobs and the economy were always a top concern for the electorate. Most taxpayers undoubtedly benefited from the 2017 tax reform — and everyone likes more money in the bank. This legislation lowered taxes for most Americans, simplified the process for all, and created prosperity. On Election Day, it remains to be seen how voters will reward this positive outcome in Pennsylvania.

Nathan Benefield is Vice President and COO of the Commonwealth Foundation (CommonwealthFoundation.org), Pennsylvania’s free market think tank.



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