How The 2017 Tax Law Harms Working Nebraskans—And Where We Go From Here

Since its passage, the 2017 tax law, championed by Republicans, has disproportionately benefited wealthy individuals and corporations while providing little relief for working families. With certain provisions of the law expiring at the end of 2025, there is an opportunity to right these wrongs and ensure a fair tax code for all.

Here are just some of the ways the 2017 tax law favored the wealthy:

Despite its promises, the 2017 tax law has disproportionately benefited corporations, corporate executives, and the ultra-wealthy over working families. Several of the law’s key provisions illustrate how working families were dealt an unfair hand. First, the bill slashed the corporate tax rate from 35% to 21%. Lawmakers promised this measure would stimulate economic growth and raise household incomes by thousands of dollars, but instead, the benefits have primarily flowed to corporate shareholders and executives rather than workers. The promised increase in household incomes did not materialize for working families.

Additionally, the law lowered individual income tax rates across various tax brackets, including a reduction in the top rate from 39.6% to 37%. But like the corporate tax rate cut, these cuts disproportionately benefited wealthy individuals. For instance, households in the top 1% will receive an average tax cut of over $60,000 in 2025, compared to less than $500 for those in the bottom 60%.

The pass-through business income deduction was another provision with skewed outcomes. The law allowed owners of pass-through businesses – partnerships, S corporations, and sole proprietorships –  to deduct up to 20% of their qualified business income from their taxes. While these businesses are not C corporations, that doesn’t necessarily make them small businesses – car dealerships, big real estate partnerships, and hedge funds are common types of millionaire-owned pass-through businesses. Therefore, while touted as a benefit for small businesses, this deduction predominantly benefits high-income business owners. For example, the top 1.5% of tax filers claimed more than half of all pass-through deductions in 2021. And filers who made more than $10 million claimed an average of $1 million in deductions – compared with filers who made $100,000, who claimed an average of just under $2,000.

Other provisions, such as the alternative minimum tax changes and estate tax changes, reduced taxes for the wealthy by reducing the number of taxpayers subject to the alternative minimum tax and the number of estates subject to estate tax – primarily benefiting wealthy families passing down large estates. Due to changes in the 2017 tax law, the estate tax exemption is now up to $13.61 million per individual – meaning only amounts above that threshold would be taxable. After the plan went into effect in 2019, only 8 in every 10,000 people who died left an estate large enough to trigger the tax.

Impact for Nebraskans

The 2017 tax law delivered dramatic cuts for the richest Nebraskans. The richest 1% of Nebraskans received 27% of the tax cuts in the bill, while the lowest 20% of earners received only 1% of the cuts.

Additionally, the richest 1% of Nebraskans received the largest tax cuts as a share of income in 2019 – averaging $50,750 in cuts in 2019. Meanwhile, the bottom 60% of earners in Nebraska received an average of only $510 in cuts.

Budget Concerns

Adding insult to injury, the tax law did not generate enough additional tax revenue through economic growth to offset the revenue lost from lower corporate taxes. Instead, the tax cuts are adding over $100 billion annually to the national debt, which is already over $34 trillion and growing. Over the course of a decade, the tax law is projected to reduce corporate tax revenues by 40%. Prioritizing tax cuts for the wealthy has a cost for working families: with the nation’s revenue base diminished, programs like Medicare and Social Security hang in the balance.

Overall, the 2017 tax bill favored the wealthy, failing to prioritize working families and the broader population. As expiration approaches in 2025, calls for a more equitable tax code ring loudly.

When Taxes Are Cut For The Wealthy, The Burden Falls On The Middle Class 

Several provisions of the 2017 tax law are set to expire at the end of 2025, including the reduced individual tax rates, the pass-through business tax changes, and the estate tax cuts (the corporate tax rate cut was permanent). However, the TCJA Permanency Act, introduced by Congressional Republicans, would make permanent most of the provisions of the 2017 tax law that would otherwise expire. Extending the law would deepen the disparities we are already seeing. 

For example, the richest fifth of Americans would receive nearly two-thirds of the tax breaks, which in total amount to $288.5 billion in 2026. And the top 1% would receive $44.1 billion in tax cuts in that year alone, with an average cut of nearly $26,000 – as opposed to the poorest fifth, who would receive an average of only $100 in tax cuts.

If the tax law was extended, Nebraska’s higher and lower earners would continue to see disproportionate impacts. Experts predicted that the middle 20% of Nebraska taxpayers would see an average tax cut of $600 – $190 less than their 2018 tax cut. Meanwhile, the lowest earners would actually see their taxes go up by an average of $70. And the wealthiest taxpayers would see an average cut of $36,530 – more than the entire annual earnings of someone in the lowest tax bracket. 

Extending the 2017 tax law would cost trillions…

Extending the expiring pieces of the 2017 law would cost $4 trillion over the next decade, in addition to its inequities. Experts suggest undoing some of the 2017 law’s corporate tax cuts and raising more revenues from wealthy people and corporations, as well as extending and expanding the Child Tax Credit, the Earned Income Tax Credit (EITC) for adults with no dependents, and premium tax credits to lower the cost of Affordable Care Act marketplace health coverage.

…but President Biden’s budget presents multiple tax provisions that would level the playing field.

In contrast to extending the expiring pieces of the 2017 law, President Biden’s 2025 budget proposal seeks to create a fairer tax code. 

The budget proposes adding a 25% minimum tax on total income for the 0.01% of households with $100 million in assets. Importantly, this minimum tax includes unrealized capital gains, which are currently only taxed when sold – thereby allowing wealthy individuals to enjoy relatively low tax rates that don’t account for these valuable assets. 

The budget would also close loopholes for wealthy pass-through business owners, as well as partially reverse the 2017 law’s corporate tax cuts, increase the corporate minimum tax, and address corporate tax avoidance through measures like quadrupling a 1% surcharge on corporate stock buybacks. These measures would significantly raise revenue over the next ten years, with estimates in the trillions of dollars. The overall effect of this proposal would also be to reduce racial disparities. 

By reversing some of the most inequitable provisions in the 2017 tax law and introducing fairer alternatives – and increasing revenue – President Biden’s budget proposal would benefit Nebraska’s working families and make corporations and wealthy individuals pay their fair share.