Despite the recent coronavirus-caused stock market dent, the American economy has been performing extremely well in the Trump era.
Much of that can be attributed to the Tax Cuts and Jobs Act, which was predicted by almost all economic forecasters to give a boost to the economy. However, partisan ideologues have pushed specious attacks on the TCJA, including the ludicrous idea that the markets’ good performance is bad for America.
Attacks on the tax reform law passed in 2017 have run the gamut from outright lies to premature estimates to run-of-the-mill misleading information. Yet supposed “exposés” keep coming forward, and they keep getting more and more ridiculous. A few months ago, ProPublica tried to blame the TCJA for hurting home values — in reality, the law had helped to lower artificially inflated prices of homes in high-income areas.
This time, though, it’s a far more nefarious tale of corruption, the Center for Public Integrity (CPI) assures us. The header is jarring — suggesting that Republican lawmakers behind the TCJA used “legislation to enrich themselves.” A classic case of swampy behavior!
How did they pull off their dastardly scheme? Well, they own stock, and the Tax Cuts and Jobs Act boosted the stock market. That’s it.
It’s certainly true that the stock market has seen gains since TCJA’s passage. The law was written with an eye toward bolstering economic growth in the form of a more internationally competitive corporate tax rate, investment-boosting deductions, and tax cuts for the vast majority of taxpayers.
Since the tax reform law was passed in November of 2017, the Dow Jones has grown by approximately 25 percent. That kind of expansion will naturally grow the wealth of most folks that own stocks. But the CPI is implying that this windfall has been limited to tax reform supporters in Congress.
That’s not the case.
First of all, Democrats in Congress and other opponents of tax reform own stock and mutual funds as well. The TCJA passed on party and ideological lines, not financial ones. The CPI itself admits that Democratic lawmakers, who all voted against the law, stood to benefit from tax reform just as supporters of the law did. And according to RollCall’s analysis of the 115th Congress, five of the 10 “poorest” members of Congress by net worth voted for the Tax Cuts and Jobs Act.
But more importantly, stock and mutual fund ownership is not limited to the wealthiest Americans. A Federal Reserve Board of Governors study from 2016 found that more than half of Americans own stock in some form, be it through direct stock ownership or participation in a mutual fund, retirement plan, or pension. That’s roughly the same as the percentage of Americans that pay the individual income tax (56 percent).
So to sum up: the Center for Public Integrity is alleging that the passage of the TCJA was unethical because it boosted stock values and the law’s proponents owned stock. But the law’s opponents own stock as well, as do a majority of Americans. Increasing the value of the Dow shouldn’t be the primary goal of economic policy, but it’s certainly not a bad thing.
The CPI does suggest that much of the growth of the stock market has come at the expense of other areas of the economy, arguing that businesses have sunk their tax cuts into buying back shares of stock, boosting their share prices. Fortunately for taxpayers, this common conception of stock buybacks is wrong.
Evidence shows that businesses engage in buybacks only in the absence of productive investments, and that buybacks serve as a means of more efficiently allocating investment dollars in the economy.
It’s unfortunate that the campaign of misleading Americans about the tax reform law continues unrelentingly. Opponents of tax reform should challenge it on its merits, not with unfounded ethics concerns or falsehoods about the nature of the law itself.