Economists on How Trump’s 2017 Tax Cuts Actually Unfolded

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Many provisions of President Trump's 2017 Tax Cuts and Jobs Act (TCJA) are set to expire at the end of 2025. He has promised to make the Trump tax cuts permanent and reduce taxes even further.

The Wall Street Journal spoke to three economists specializing in corporate taxes, pass-through business taxes, and individual taxes. They discussed the effects of the 2017 tax cuts and what might happen if they expire.

Impact of Corporate Tax Cuts

The TCJA permanently reduced the top corporate income tax rate from 35% to 21%, aligning the U.S. more closely with other G7 countries. Trump stated that this would prevent companies from leaving the country.

The corporate tax cut had a modest effect on corporate investment, as firms reinvested some of their tax savings. However, a study co-authored by Harvard economics professor Gabriel Chodorow-Reich found that the tax cuts did not generate enough economic growth to offset the decline in corporate tax revenue. In 2018 and 2019, tax revenues decreased significantly, reducing government income while corporate investments increased slightly.

Trump’s Treasury Secretary, Steven Mnuchin, had claimed that the tax cuts would generate enough economic growth to pay for themselves and even reduce the national debt. However, Chodorow-Reich’s study found that corporate tax revenues declined significantly, and the additional investment did not generate sufficient growth to make up for the loss.

In 2017, White House economic advisors estimated that corporate tax cuts would increase household incomes by $4,000 to $9,000. However, Chodorow-Reich and his colleagues used 2018-2019 data to estimate a much lower wage boost—about $750 per full-time employee.

Impact of “Pass-Through” Tax Cuts

Most small to medium-sized businesses file taxes as pass-through entities, meaning their business income is taxed as part of the owner's individual income. Unlike corporations, these businesses did not receive a permanent tax cut.

The 2017 tax bill created the 199A provision, which granted a temporary 20% tax deduction on qualified income for millions of business owners. Economist Elena Patel studied this provision and found little evidence that it boosted investment or employment. Instead, it functioned primarily as a tax cut for business owners.

Pass-through business owners tend to have higher incomes, and the tax benefit disproportionately favored the wealthiest individuals. Critics argue that the provision primarily benefited the top 1%. Republican lawmakers have pushed to renew the 199A deduction, warning that its expiration would raise tax rates for many businesses. If extended, the deduction is projected to reduce federal revenue by nearly $700 billion over the next decade.

Impact of Individual Tax Cuts

Democrats have largely criticized the 2017 tax cuts for disproportionately benefiting the wealthy. However, Williams College economics professor John Bakija argues that the reality is more complex.

The top 1% of earners received a tax cut equal to about 2% of their income, while middle-class and lower-income individuals received smaller cuts. For the poorest 20% of earners, the tax cut amounted to about 0.5% of their income.

Although these percentages may seem small, the actual dollar amounts show a stark contrast—the average tax cut for the top 1% was more than $60,000 greater than the tax cut for the lowest income group. The Congressional Budget Office estimates that extending individual tax cuts would cost over $3.25 trillion in the next decade, along with more than $400 billion in additional interest payments.

What’s Next for Trump's 2.0 Tax Plan?

Democrats warn that extending the 2017 tax cuts would come at the expense of social programs that support Americans, arguing that it could weaken the social safety net. Meanwhile, Republicans continue to advocate for making the cuts permanent.

In February, House Republicans passed a budget proposal that includes at least $1.5 trillion in spending cuts and up to $4.5 trillion in tax cuts over the next decade. The Committee for a Responsible Federal Budget estimates that Trump's tax priorities could reduce government revenues by $5 to $11 trillion over ten years.

Elon Musk’s Department of Government Efficiency has suggested that cost-saving measures could help lower taxes, though it remains unclear how Trump and Republicans plan to close the revenue gap. Extending all provisions of the 2017 tax cuts is estimated to cost approximately $5.5 trillion, raising concerns about long-term fiscal sustainability.