The Washington PostDemocracy Dies in Darkness

Is the GOP tax plan an unprecedented windfall for the wealthy? We look at 50 years of data to find out.

Treasury Secretary Steven Mnuchin, right, and his wife Louise Linton hold up a sheet of new $1 bills on Nov. 15 at the Bureau of Engraving and Printing in Washington. The image went viral on social media, where critics said it symbolized America's out-of-touch wealthy elites. (Jacquelyn Martin/AP)

The Democrats say President Trump's tax cuts are a massive giveaway to the rich, the most unequal overhaul of the U.S. tax system in modern history. Republicans argue they are a huge middle class tax cut — “a great, big, beautiful Christmas present” for the American people, according to Trump.

Who's right?

We decided to find out by assembling historical reports about the 10 largest tax cuts of the past 50 years.

After doing our best to find comparable data (we’ll explain metrics and methodology later), we learned a few things:

Comparing tax plans across generations is hard. Super hard.

But we can say the Republicans’ $1.4 trillion tax plan isn’t the biggest in history. It’s not even the biggest in the past decade.

It’s probably the most regressive tax cut in the past 50 years, but there’s not enough data to speak with absolute confidence. The Bush tax cuts were pretty regressive too.

That said, it is hard to find a tax plan that has done less for the middle class.

The House and Senate have passed different tax overhauls to date, and now they're turning to reconciling their bills with hopes of sending a final version to Trump by year's end.

To understand the winners and losers, we examined each bill both for its effects on individual filers and on income groups as a whole. First, we charted how much the average tax filer in each group would see their burden fall under the bill (red bars). Then, we looked at which income brackets are getting the largest slice of the pie (teal bars). The income brackets change over time, so for context we’ve contrasted each one with the population in that bracket (black outline).

By those measures, the nonpartisan Tax Policy Center’s model shows most taxpayers will see their tax bills fall in the coming year, but the Senate bill would hand half of the tax cut’s overall value to filers earning more than $200,000 (based on the last-scored version of the bill, released before additional adjustments were made late Friday). The House bill isn’t far behind.

To know if that distribution is typical, we’d need to know what it looked like for Trump’s predecessors. So, we placed it in the historical record as best we could. The Trump tax cut would not be the biggest since 1968 — especially when measuring its effects for only the first two years, which is the best measure available for its earlier competitors — but it will be in the top 10.

The earliest cuts in the top 10 follow a pattern. Presidents Richard Nixon and Jimmy Carter were primarily trying to handle fallout from the high inflation of that era. Prices were rising fast, incomes were rising fast, and people were ending up in higher income-tax brackets. But because most of that increase in income reflected an increase in prices, people's buying power and quality of life were stuck in neutral. So both Nixon and Carter sought big tax cuts. And in general, the benefits of the cuts followed the curve of the population — with most going to the large middle class, and with the tax bills dropping the most for those who earned the least.

In both ideological and practical terms, Ronald Reagan’s “Economic Recovery Tax Act of 1981” seems like a good candidate for the closest analogue to the Trump tax cuts. Reagan cut tax burdens across the board, reduced the estate tax and took measures to encourage corporate investment. But even Reagan’s tax cuts at least resembled the population curve, albeit one shifted toward the middle and upper-middle class.

Two decades later, George W. Bush’s twin first-term tax cuts followed a different pattern, one that would see the benefits tilt sharply toward the wealthiest Americans. The 2001 round of Bush tax cuts were the first in our sample that leaned heavily toward the rich. The second round of tax cuts in 2003 solidified the gains for the wealthiest brackets.

It would be a prelude of the Trump cuts.

Given his track record, Bush’s 2008 stimulus package was surprisingly progressive. It centered on a flat one-time rebate that didn’t vary much with income, so the distribution curve followed population more closely. The shift made economic sense, because lawmakers wanted people to spend that money immediately to boost the economy, and lower- and middle-class people are more likely to spend a tax cut than the wealthy.

The stimulus package passed by Barack Obama the following year cut an equally progressive profile.

Obama’s other entries in the top 10 — both of them compromises to extend or make permanent the Bush tax cuts — were much less equal in their distribution than the 2008 and 2009 stimulus packages, but that’s before you consider their baseline. They were both more equal in their distribution than Bush’s original cut package, and the poorest brackets saw their tax bills fall much more quickly in Obama’s compromise version.

In that context, it's time to review the Trump tax cuts once more. We'll focus on the most recent Senate cuts for now. To put them into perspective, we've included the 2001 and 2003 Bush tax cuts right below them. Compare them with particular focus on the lowest and highest earners.

Viewed from the lens of the present proposal, the lowest-income groups got a relatively generous share of the Bush cuts —13.8 percent of the 2001 cut went to those earning less than $30,000. Compare that with 1.9 percent in the current Senate bill and 2.4 percent in the House bill for lowest-income earners.

Part of the difference is due to inflation pushing people into higher groupings on the chart, but that doesn't explain the bars on the left. Even adjusting for population and relative income, low- and middle-class groups aren't seeing their tax bills fall any faster than the wealthiest Americans. Even the first Bush tax cuts were progressive by that measure, with lower-income brackets seeing their bills fall proportionately faster. Trump cuts will be much flatter in their implementation.

Our main takeaway: The Trump plan and the 2003 Bush cuts were harder on the middle class than anything else in our sample, with both giving outsize benefit to those earning more than $100,000 a year in the first year after implementation.

To be sure, the first year after enactment doesn’t tell the full story of either cuts’ true inequality. The Tax Policy Center forecast the second round of Bush cuts to shift heavily toward the benefit of wealthy taxpayers. Those earning more than $500,000 went from taking home 24 percent of the overall cut in 2004 to pocketing 50 percent in 2006.

But even by that metric, the current House and Senate plans might have Bush beat when it comes to shifting money to the wealthy. The Senate plan was the only one in our sample that raised taxes on any group — doing so for lower-middle-class earners by 2027. That's largely because almost all the individual income tax provisions expire at the end of 2025.

And in that same year, the Tax Policy Center forecasts those earning more than a half-million dollars will be taking in 68.5 percent of the cut’s overall value in the Senate plan, a boost to the highest earners that was also without precedent in our sample.

Nonetheless, there’s just enough competition from the Bush tax cuts, and just enough uncertainty introduced by inflation and patchy data that we can’t declare unequivocally the current Republican plan to be the least equal in the past half-century.

But there's a very strong case.

How we did it

Historical tax-equality data is hard to find and littered with caveats. To make the charts as comparable as possible, we focused on common measures used by two trusted tax-bill scorers.

Even so, the income-distribution curves on each chart are only rough estimates. In all cases, we used projections made at the time of the bill’s passage, but income brackets and taxation measures aren’t consistent year-to-year, especially for the early Joint Committee on Taxation estimates.

A small change in taxation for those who already pay relatively little can have an outsize effect.

To find the 10 largest cuts, we relied on the average revenue effect of the bill in its first two years, based on a 2013 Treasury Department analysis. We couldn’t find comparable data for one bill (the Tax Reform Act of 1976), so we included the 11th largest (the Revenue Act of 1971) to round out the top 10.

To account for both inflation and the amount of taxable output available, we measured the size of each tax cut relative to the size of the nation’s economy at the time.

This is a tricky subject to research amid a contentious, evolving legislative debate, and it’s likely that we missed something or that our analysis can be improved. If you have additional data, fixes or suggestions, you can always find me in the comments or via email.