Trump’s tax cuts have so far failed to deliver on one key promise

  • The Trump tax cuts were pitched as a boon to US workers, with the administration arguing their benefits would trickle-down into rising wages.
  • While the tax cuts have meant some Americans are keeping more of their paychecks, no discernible gains in wages have materialised thus far.
  • Real average hourly earnings (adjusted for inflation) for all employees on private nonfarm payrolls were totally unchanged in June from one year earlier.

President Donald Trump’s massive tax cuts were pitched by the administration as pro-worker, despite extensive analysis documenting the vast majority of benefits would accrue to the wealthiest Americans and the corporations they run.

“Because of our tax cuts, you can keep more of your hard-earned money,” Trump said in his April speech celebrating what the White House touted as “Tax Cuts for American Workers.”

Trump emphasised the message: “This event is dedicated to you: the hardworking Americans who make our nation run.”

And earlier, in February, the president’s former chief economic advisor Gary Cohn said “one of the real impetuses for our tax reform and tax cut plan was to get real wages to grow in the United States, we haven’t had real wage growth in a long time in the United States.”

Now that enough time has elapsed since the passage of the tax cuts for economists to begin analysing the data, it’s clear that while many Americans may be seeing a bit more money in their paychecks as a result of the new tax breaks, the promised wage growth and business investment have yet to materialise.

A report from the Center for American Progress, a liberal think tank in Washington, points to the following in particular:

  • Real average hourly earnings (adjusted for inflation) for all employees on private nonfarm payrolls were totally unchanged in June from one year earlier.
  • Real average hourly earnings the approximately 80% of workers categorized as “production and nonsupervisory employees” edged 0.2% lower over the same period.
  • Real median weekly earnings have also decreased slightly.

This chart paints an even clearer picture:

Real WagesCenter for American Progress

Trump talked up the second quarter’s strong 4.1% annualized pace of US gross domestic product growth, but most economists expect that number to come down closer to the recent 2% trend – and that’s without the drag from worsening trade wars.

“Workers are not getting ahead in the Trump economy,” write CAP economist Michael Madowitz and senior fellow Seth Hanlon in a report.

The 2% gain in nominal weekly median earnings from the second quarter of 2017 to the second quarter of 2018 was outpaced by inflation, which registered 2.7% over the same period, they note.

“Official data released in recent weeks have shown that workers’ wages are flat or even slightly down, in real terms, over the last year.These data fly in the face of many tax plan boosters who have claimed that the bill’s passage has already been a boon to middle-class workers.”

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