Following the rollout of the much-touted Republican Tax Cuts and Jobs Act, passed in December 2017, most of us have wondered how the new policy is affecting various sectors of the economy.
It’s still early, but the numbers from the first quarter of 2018 are noteworthy.
First, let me clarify what this chart is representing. It shows the percent change from the prior year for tax revenue collected by the federal government.
Though the revenue collected by the federal government doesn’t necessarily tell the whole story about the amounts and percentages people and companies are paying, it does give us general insight into who is being affected and by how much.
Source: U.S. Bureau of Economic Analysis
Total receipts from individual taxpayers went little unchanged: revenue from individuals rose 1% from last year but reversed a trend of more drastic increases. This can likely be attributed to the combination of relatively minor individual tax cuts, which would cause the figure to fall, with the expansion of the workforce and more robust employment, which would cause revenue to rise.
Essentially, the base is widening while many individuals seem to be paying less — though not much less.
Corporations Are Big Winners
The most significant change came in the corporate sector: a 35% decrease in total tax revenues.
This seems to confirm what many said about the law prior to its passage: It would disproportionately benefit corporations over private citizens.
Republicans did not necessarily shy away from that characterization, as some argued that the corporate savings would be reinvested in the workforce. Tax revenues do not clearly represent the potential effect of rising wages (like employment, wages are included as an unseen piece of the measure), but recent real wage reports from the Bureau of Labor Statistics have shown stagnant wage growth – 0% growth from May 2017 to 2018.
If wages were rising faster, combined with the growth in employment, we would see a larger increase in tax revenue collected from individuals.
Jump in Revenues from International Trade
The other significant change was in excise tax and import duty income, combined under the broad umbrella of “taxes from the rest of the world.”
That revenue spiked as Trump began to implement more protectionist measures against essentially all American trading partners. The figure will likely continue to rise as more rules and tariffs, implemented after the first quarter, begin to take effect.
What’s the final gist?
The federal government has, in total, collected 4.45% less in Q1 of 2018 than it did in the same period of 2017.