During President Donald Trump’s first term, Congress passed a massive tax-reform law that many criticized as being tilted in favor of the rich.
But a recent analysis from the Heartland Institute found that the Tax Cuts and Jobs Act of 2017 led to the average effective income tax rate decreasing for Americans of all income levels. And contrary to widespread belief, lower-income and middle-income taxpayers benefited the most.
Specifically, the analysis based on IRS data concluded that the 2017 law saved lower- and middle-class Americans more on taxes than it saved higher-earners in percentage terms. The law also decreased the tax burden of people in lower income brackets while increasing the burden of people in higher income brackets.
Here is a more detailed breakdown of the savings for the 2022 tax year compared with the 2017 tax year, before the Tax Cuts and Jobs Act started taking effect:
| Adjusted gross income (AGI) range | Average taxes paid per filer, 2017 | Average taxes paid per filer, 2022 | Decrease in average taxes paid, 2017 to 2022 |
|---|---|---|---|
| $1 to $5,000 | $3.28 | $2.29 | -30.24% |
| $5,000 to $10,000 | $34.11 | $4.74 | -86.12% |
| $10,000 to $15,000 | $120.03 | $19.52 | -83.74% |
| $15,000 to $20,000 | $328.69 | $191.67 | -41.69% |
| $20,000 to $25,000 | $632.45 | $473.41 | -25.15% |
| $25,000 to $30,000 | $1,031.82 | $796.52 | -22.80% |
| $30,000 to $40,000 | $1,720.47 | $1,351.95 | -21.42% |
| $40,000 to $50,000 | $2,819.03 | $2,286.62 | -18.89% |
| $50,000 to $75,000 | $5,041.06 | $4,205.01 | -16.58% |
| $75,000 to $100,000 | $8,362.71 | $7,448.73 | -10.93% |
| $100,000 to $200,000 | $17,091.12 | $15,365.10 | -10.10% |
| $200,000 to $500,000 | $54,699.98 | $48,220.70 | -11.85% |
| $500,000 to $1,000,000 | $171,230.39 | $155,428.73 | -9.23% |
| $1,000,000 to $1,500,000 | $333,633.12 | $315,902.13 | -5.31% |
| $1,500,000 to $2,000,000 | $487,902.36 | $467,806.03 | -4.12% |
| $2,000,000 to $5,000,000 | $852,636.35 | $825,572.70 | -3.17% |
| $5,000,000 to $10,000,000 | $1,937,354.50 | $1,892,881.08 | -2.30% |
| $10,000,000 or more | $7,991,562.48 | $7,689,477.85 | -3.78% |
| No AGI | $97.90 | $39.46 | -59.69% |
Despite criticism that the Tax Cuts and Jobs Act (TCJA) of 2017 was full of tax cuts for wealthy folks, the Heartland Institute, which describes itself as conservative and libertarian, argues that the law actually made the tax code more progressive.
While acknowledging that the tax cuts provided high-income earners with the largest savings in terms of total dollars, the institute says the 2017 law resulted in a higher tax burden for people with an adjusted gross income of $200,000 or more.
By “tax burden,” the institute means the percentage of all federal personal income taxes that are paid by people in a given income bracket.
For example, people with an adjusted gross income of $50,000 to $75,000 paid about 6.6% of all personal income taxes paid for the 2017 tax year. For 2022, their tax burden was lower, at about 4.7%.
On the other hand, people with an AGI of $1 million to $1.5 million saw their tax burden increase, from about 4.6% to 5.3%, over the same period.
According to the analysis:
“In other words, the TCJA was technically a progressive tax law that caused higher-earning filers to pay more of the total tax burden than they did in the years leading up to the tax law’s passage.”
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