Editor’s Note: Steven T. Mnuchin is the 77th Secretary of the Treasury. Prior to his confirmation, Secretary Mnuchin was Finance Chairman for Donald J. Trump for President. The views expressed in this commentary are his own. View more opinion on CNN.
Americans just finished filing their taxes for 2018. And this is the first year that the benefits of the Tax Cuts and Jobs Act (TCJA) have been improving the lives of our citizens. In fact, we are pleased to report that we have experienced a year of more jobs, bigger paychecks, increased business investment and lower tax liability.
Lower tax rates, higher standard deductions and larger child tax credits have benefited most Americans. According to Treasury’s analysis, in 2017, a typical American household earning $75,000 in pre-tax wages was paying $3,983 in federal income taxes. Each month, $347 was withheld from their paychecks, and they received a $178 refund when they filed their 2017 taxes. In 2018, that typical family earning $75,000 saw their total taxes fall to just $1,739, a tax reduction of $2,244 per family. The tax cut was mostly realized through the nearly $200 per month added to their paychecks. They are also receiving a $41 refund, which means that instead of overpaying the government, they were able to keep more of their hard-earned money every month.
According to recent data released by H&R Block, their clients saw their taxes decline by 24.9% on average. As the company explained, average tax refunds are up just 1.4% for their customers because 96% of the reduction “went into paychecks during the year.” They also found that for their customers, “all 50 states and D.C. saw their average tax liability decrease anywhere from 18.0 percent to 29.1 percent.”
Additionally, per the non-partisan Tax Policy Center, about 80% of American taxpayers were estimated to see their federal taxes decline as a result of the tax reforms that we have implemented. This means that more than 140 million American families are likely experiencing federal tax savings because of the TCJA.
Americans also saw large wage gains in 2018 as a result of the stimulus to economic activity generated by the TCJA, combined with the Trump administration’s deregulatory activities of the past two years.
Over the eight years prior to President Donald Trump taking office, American wage gains were minimal, rising 2.1% on average and less than 0.4% per year, after accounting for inflation. Those days of stagnation are over. Americans are once again starting to see meaningful real wage increases, particularly among low-wage workers.
During 2018, nominal wages grew 3.3% and 1.3% accounting for inflation, increasing the buying power of American families. Based on average wage growth and Treasury’s analysis, the typical family who made $75,000 in 2017 saw their income rise to about $77,500 by the end of 2018. Even though they made more money, their federal income taxes declined $1,947. Depending upon the state they live in, that means this typical American family could be earning as much as $4,000 more in after tax income at the end of 2018 than they had in 2017. Prior to enactment of the tax bill, we estimated that families would see thousands of dollars more in their pockets, and I am very happy to report that we are seeing that come to fruition.
Americans’ retirement accounts and education savings accounts are also benefiting from the improved economic environment. Since Election Day 2016, holdings in US equity markets have increased by over 35%.
Our growing economy has improved the retirement security of our retirees and provided more money for parents across the nation to provide for the education needs of their children. This reaffirms our fundamental belief that when the economy grows, the benefits extend across our society.
Not only are American families who were working in 2017 seeing higher incomes as a result of tax reform, but also more Americans are working because the TCJA has incentivized industry to invest in the United States.
Workforce participation among prime-age workers stands near its highest level in almost a decade, and for the first time since at least 2001, there are more job openings than Americans looking for work.
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The TCJA incentivized investments in equipment and intellectual capital that will continue to improve the productivity of American workers. When Americans are more productive, they are better compensated. Today’s capital investments are the foundation of tomorrow’s additional wage gains.
The American economy is stronger today than it was before the TCJA. Business and consumer optimism has returned. Capital investment is increasing. Americans are returning to the workforce, and consumers have more money in their pockets. Entrepreneurs are once again finding an environment that rewards their creativity and dynamism. President Trump’s economic program is leading to more jobs and higher wages for hardworking Americans.