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How do higher marginal tax rates affect state migration?
In addition to voting in state-wide elections, individuals can also vote with their feet by moving to a state that treats income more favorably. The data has born this out, with high tax states seeing large migration flows out while low-tax states see large migration flows in. This is partially in response to the 2017 Tax Reform, which prevented taxpayers from deducting state income taxes from their federal returns.
Incentives matter, and higher marginal tax rates are a key factor motivating location decisions between states.
What would repealing the 2017 TCJA mean for the average family?
Repealing the individual side of the 2017 tax cuts would raise taxes on nearly all Americans, with the largest increases in federal income taxes borne by low- and medium-income earners. Using the Open Source Policy Center’s Tax-Cruncher, The Right Facts has calculated the impact of repealing the 2017 tax cuts on different household types.
What have been the effects of the 2017 Tax Cut?
Beyond reducing income tax burdens and boosting disposable household incomes, the Tax Cut and Jobs Act (TCJA) lowered the cost for businesses to purchase new capital. This has led to increased nonresidential capital investments that have boosted GDP growth. The 2017 tax cuts also reversed the trend of declining labor force participation. More people are now working across all age groups and the increased worker participation is large. This is especially true for black men and Hispanic women, who have experienced the largest gains.
- Investment Up as Expected After Tax Cuts.
- Labor Force Participation Up Since Tax Cuts.
- Tax Cuts: More Workers, Tax Increases: Fewer Workers
- More People Seeking Work Today Than Three Years Ago
How are average Americans faring in the current economy?
Recent data show that average real disposable income for households has increased by nearly $7,000 since December 2016. American families have more money left over after taxes to spend, save, and invest. The benefits to working Americans are also apparent from rising wages. Average hourly earnings rose 2.9 percent in December and wage growth has been at or above 3 percent for 16 straight months. These gains have disproportionately benefited low-skilled workers who need it the most. With a growing economy and a strong labor market, 1.4 million fewer people are in poverty than in 2017 and income inequality is falling.