page_title: Economic policy of Donald Trump administration
section_title: Income and wealth inequality
hierarchical_section_title: Economic policy of Donald Trump administration / Income and wealth inequality
caption_attribution_description: English: Four charts that describe trends in income inequality trends in the United States.
context_page_description: The economic policy of the Donald Trump administration is characterized by individual and corporate tax cuts, attempts to repeal the Patient Protection and Affordable Care Act, trade protectionism, immigration restriction, deregulation focused on the energy and financial sectors, and responses to the COVID-19 pandemic.
  A key part of President Trump's economic strategy during his first three years was to boost economic growth via tax cuts and additional spending, both of which significantly increased federal budget deficits. The positive economic situation he inherited from President Obama continued, with a labor market approaching full employment and measures of household income and wealth continuing to improve further into record territory. President Trump also implemented trade protectionism via tariffs, primarily on imports from China, as part of his "America First" strategy. According to the Congressional Budget Office, the number of Americans without health insurance increased under Trump, while his tax cuts were projected to worsen income inequality.
context_section_description: The New York Times editorial board characterized the tax bill as both a consequence and a cause of income and wealth inequality: "Most Americans know that the Republican tax bill will widen economic inequality by lavishing breaks on corporations and the wealthy while taking benefits away from the poor and the middle class. What many may not realize is that growing inequality helped create the bill in the first place. As a smaller and smaller group of people cornered an ever-larger share of the nation's wealth, so too did they gain an ever-larger share of political power. They became, in effect, kingmakers; the tax bill is a natural consequence of their long effort to bend American politics to serve their interests." The corporate tax rate was 48% in the 1970s and is 21% under the Act. The top individual rate was 70% in the 1970s and is 37% under the Act. Despite these large cuts, incomes for the working class have stagnated and workers now pay a larger share of the pre-tax income in payroll taxes.
  The share of income going to the top 1% has doubled, from 10% to 20%, since the pre-1980 period, while the share of wealth owned by the top 1% has risen from around 25% to 42%. Despite President Trump promising to address those left behind, the Tax Cuts and Jobs Act would make inequality far worse:
  The Tax Policy Center estimated that the bottom 80% of taxpayers (income under $149,400) would receive 35% of the benefit in 2018, 34% in 2025 and none of the benefit in 2027, with some groups incurring costs.
  Sizable corporate tax cuts would flow mostly to wealthy executives and shareholders;
  In 2019, a person in the bottom 10% would average a $50 tax cut, while a person in the top 1% gets a $34,000 tax cut;
  Up to 13 million persons losing health insurance or subsidies are overwhelmingly in the bottom 30% of the income distribution;
  The top 1% receives approximately 70% of the pass-through income, which will be subject to much lower taxes;
  Rolling back the estate tax, which only impacted the top 0.2% of estates in 2016, is a $150 billion benefit [Note: The final version of the tax law reduced this to $83 billion] to the ultra-rich over 10 years.
  The top 1% of households own 40% of stocks; the bottom 80% just 7%, even when including indirect ownership through mutual funds.
  In 2027, if the tax cuts are matched by spending cuts borne evenly by all families, after-tax income would be 3.0% higher for the top 0.1%, 1.5% higher for the top 10%, -0.6% for the middle 40% (30th to 70th percentile) and -2.0% for the bottom 50%.
  The NYT reported in July 2018 that: "The top-earning 1 percent of households—those earning more than $607,000 a year—will pay a combined $111 billion less this year in federal taxes than they would have if the laws had remained unchanged since 2000. That's an enormous windfall. It's more, in total dollars, than the tax cut received over the same period by the entire bottom 60 percent of earners." This represents the tax cuts for the top 1% from the Bush tax cuts and Trump tax cuts, partially offset by the tax increases on the top 1% by Obama.
  In December 2019, CBO forecast that inequality would worsen between 2016 and 2021, due in part to the Trump tax cuts and policies regarding means-tested transfers. Their report had several conclusions:
  After taxes and transfers, the income of the top 1% would grow more than other income groups, continuing previous trends.
  Income of households in the bottom 99% percent would be higher than at any time in the past, adjusted for inflation, also continuing previous trends.
  For the top 1%, average federal tax rates would fall from 33% in 2016 to 30% (3 percentage points) in 2021. For the 81st to 99th percentiles, the rate would fall from 24% to 22%, and for the middle three quintiles, the rate would fall from 15% to 14%. These trends indicate worsening inequality, with larger tax reductions for higher incomes.
  The gini index would rise, indicating increasing inequality, reversing a trend from the latter part of the Obama administration.
  Means-tested transfer programs would contribute le
caption: Four charts that describe trends in income inequality in the United States.
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