Tax Cuts Will Harm Most American Families

 I prefer readers read my most previous articles, May, April 2025 and December 2024. But since we are facing an ugly proposal of tax cuts for the wealthy, I'm posting this "letter to the editor" that the Mariposa Gazette published on June 5, 2025. It's short. The better choice is to read the most previous articles (postings) and get a broader understanding of the entire economy, the inequality, the extent of poverty, and the solutions available. 

Mariposa Gazette, letter to editor,    May 31, 2025,  

Why the Trump/GOP Tax Cuts Make No Sense  

It’s well known among economists that the tax cuts for the wealthy make no sense. Since 1973 the average yearly income of the nonsupervisory worker, commonly known as the “employee”, and involving 80% of all who work in the U.S., the average income for this worker was higher in 1973 than in 2025. So, think about it. The average wage income for 80% of U.S. workers was higher 52 years ago.

During those 52 years the per capita income, inflation adjusted, increased, by 151% (Federal Reserve, FRED, Real Disposable Personal Income: Per Capita (A229RX0)) From January 1973 to April 2025, an increase from $20,904 to $52,589, up 151%.

Eighty percent of workers had no income gains, the per capita economy expands by 151% -- who do you think reaped the benefit? Therefore, what sense does it make to cut taxes for the very wealthy whose incomes have exploded, which is essentially what the Trump tax cuts are all about. These are all documented facts, by the way.   The next graph shows the growth of households' incomes, the top line is the top 1% of households whose incomes increased from $795,200 in 1976 to $2,800,000 in Feb. 2023, increasing by a multiple of 3.5. or 252%. (From RealTime Inequality, Household Income, Factor Income, Real Income Growth).

To the majority of working America the cuts simply hand more power to the wealthy few. Many economists call our era the “New Gilded Age”, the age of new robber barons. These economists have it right. Here’s a quote from a study (page 12) with that title:  
 
"The average inflation-adjusted income of the bottom 99 percent of families grew by 100.1 percent between 1945 and 1973. Over the same period, the average income of the top 1 percent of families grew by 34.3 percent. Faster income growth for the bottom 99 percent of families meant that the top 1 percent captured just 4.9 percent of all income growth over the period. (Data are shown in Appendix Table B7.) 
 
The pattern in the distribution of income growth reversed itself from 1973 to 2007 as the income of the bottom 99 percent of families grew much more slowly (by just 15.4 percent) compared with the top 1 percent, whose average income grew by 216.4 percent. As a result, over half (58.7 percent) of all income growth in this period landed in the hands of the top 1 percent of families. (Data are shown in Appendix Table B8.)" (See “The New Gilded Age” by E. Sommeiller and Mark Price, EPI.org, p.12) 

My next quote comes from David Madland in a 2016 article published at the Center for American Progress:  
“Wages for the typical private-sector worker, adjusted for inflation, are still about where they were in the 1970s, even as the costs of core middle-class goods such as housing, healthcare, child care, and higher education have grown rapidly. Economic output per person has nearly doubled over the past four decades, but the vast majority of these gains have gone to those at the very top.” (see “A Path Forward for the Middle Class and the Country”, Nov 6, 2016) 

From the Institute for Taxation and Economic Policy, “Roughly 68% of the tax cuts go to the richest 20% in the U.S. . . . For working-class Americans, the tax cuts in the House bill are extremely modest, and overall taxes would rise for these families when the impact of tariffs are accounted for.” (See “Federal Tax Debate 2025” at ITEP.org)

How did the highest earning 20% do over the past 40 years or so? They did better by far than any other sector of the population. The Congressional Budget Office published the report “Trends in the Distribution of Income After Transfers and Taxes, 1979 to 2018", and it shows that the highest earning 20% increased their post-tax and post-transfer income by $132,800, from $111.1K to $243.9K over 39 years. The lower 20% increased their income by $18,000, and the middle 60% increased their incomes by $25,600. I detail these data at my blog, Economics Without Greed, Part Two.  

The harm that the tax cuts will do is well documented at CBPP.org and CAP.org and EPI.org.  Therefore, if you wish to damage the U.S. population, then support the tax cuts; otherwise, you can call or write a letter to the President and his team in Congress.   

Ben Leet, resident of Mariposa                   Economics Without Greed, Part Two     

Short is beautiful. I encourage the reader to read these 3 articles: From CBPP -- Take your choice among essays describing cuts in food aid, healthcare subsidies, cuts to rural communities, etc. -- all the victims of this ugly tax cut bill. The article by Nick Gwyn proposes 8 improvements to raise incomes of low income workers.

From CAP.org -- a frightening article about rising costs due to the cuts in programs, a brief quote: "A 60-year-old couple making $85,000 per year who hope to stay on their same marketplace plan would see their annual premium costs skyrocket by $15,400, from about $6,900 to about $22,300.

From EPI.org -- To quote: "Under this legislation, the bottom 40% of households would lose income and resources while the top 1% of households—those making nearly $800,000 a year—would gain enormously."

The previous two blog posts -- the December 2024, the April 2025 -- and this one comprise a summary of what I have been saying since I began blogging over a decade ago. They work together. The main problem has been no growth in wages since 1973. The solutions are multiple. That's the outline for this posting and the previous two. Societal happiness on one hand or societal distress and lost dreams hang on the outcome of money issues. Survival itself. The economy is complex, the solutions defy simplicity. 

The first, here, is about income distribution. The next explains and 'proves' that 40% of U.S. society have been left out of prosperity and damaged by our malfunctioning economy. And the December one is about Solutions. And it's long; I offer about a dozen solutions. 

            The CBO Report on Inequality                                                "Distribution of Household Income, 2018" is the title, but it covers the period between 1979 and 2018, a 39 year period. My focus will be on  Exhibit 22 (page 32), as it demonstrates the unequal gains the top 20% made during the 39 year period. The CBO title for the pdf report is "Trends in the Distribution of Income After Transfers and Taxes, 1979 to 2018" from the Congressional Budget Office.  

The graph below appears on page 32, and below this graph is a link to the data source where we uncover the details, see "Data Underlying the Exhibits". I find the details inflamatory, a conclusive set of evidence that our economy has failed. The table shows 3 groups' average incomes over 39 years; the groups are the lowest earning 20%, the middle 3 quintiles or middle 60%, and the top quintile or 20%.

The table shows that the lowest 20% increased their post-tax and post-transfer real (inflation adjusted) incomes by $18,000, from $19.7K to $37.7K. This is a 91% gain, mostly caused by government transfers of in-kind services (Medicaid, Medicare, SNAP, housing subsidies, etc.) or income (Social Security, Earned Income Credit, and cash assistance). This graph above is post-tax and post-transfer income.

The middle 60% grew their income by $25,600, from $48,200 to $73,800. This is an 88% gain. 

The top quintile grew their income by $132,800, from $111.1K to $243.9K, an increase of 119%. 

It's illustrative to also compare the pre-tax and pre-transfer incomes, by looking at Exhibit 3 (again see Data Underlying Statistics). By my calculation the lower-earning quintile received only 3% of all growth, the mid 60% group 27%, and the top 20% received 70%.
The lower 20% pre-tax income increased over 39 years from $16,100 to $22,500 (a gain of $6,400 and up 40%, but post-tax average was $37.7K); the mid 60% increased from $59,000 to $80,000 (a gain of $21,000 and up 37%, but post-tax was $73.8K), and the top 20% average pre-tax income grew from $152,300 to $321,700 (a gain of $169,400 and up 111%, but post-tax was $243.9K). Therefore, the lower 20% gained greatly from transfers, and the higher 20% gained from lower tax rates.  

Not to make it too complicated, the lower 20% in 1979 had a pre-tax-and-transfer income of $16,100 and a post-tax post-transfer income of $18,000 -- only a gain of $1,900. But post-transfer income greatly increased by 2018; pre-tax-and-transfer  average income for the lower 20% was $22,500 and post-tax-transfer it was $37,700 (a gain of $15,200 or 66%). Clearly the in-kind social benefit transfers aided the lower 20% households enormously. 

The following graph from the Bureau of Labor Statistics shows that "average weekly earnings" for about 80% of full-time workers were slightly higher in 1973 than in 2025, higher by 4.3%. The overall economy per person grew by 138%. Prosperity did not touch the average income of 80% of workers.  

Perhaps this is the most important graph I've encountered in all the years of looking around. Note the precipitous drop from Feb. 1973 to  May 1993, a drop of 29.9% between the two dates. If the average was $50,000 in 1973, the average fell to $35,050 in May of 1993. The 1973 peak has not been re-achieved after 52 years. In Feb. 2023 weekly earnings still lag the Feb. 1973 peak by 4.3%. How much did the economy (GDP/capita and inflation adjusted) grow in 52 years? By 138% (see the Fed's FRED).
                                

The CBO reports that 58% of growth, post-tax-transfer, went to the top 20%, and 34% went to the middle 60%, and 8% went to the lower 20%. This finding is similar to the finding from a study by the Economic Policy Institute, "The New Gilded Age". This study reviewed  disparate growth favoring the lower 99% between 1945 and 1973, and a switch to disparate growth favoring the richest from 1973 to 2018. On page 12, pdf version, we learn the staggering differences,  

"The average inflation-adjusted income of the bottom 99 percent of families grew by 100.1 percent between 1945 and 1973. Over the same period, the average income of the top 1 percent of families grew by 34.3 percent. Faster income growth for the bottom 99 percent of families meant that the top 1 percent captured just 4.9 percent of all income growth over the period. (Data are shown in Appendix Table B7.)

The pattern in the distribution of income growth reversed itself from 1973 to 2007 as the income of the bottom 99 percent of families grew much more slowly (by just 15.4 percent) compared with the top 1 percent, whose average income grew by 216.4 percent. As a result, over half (58.7 percent) of all income growth in this period landed in the hands of the top 1 percent of families. (Data are shown in Appendix Table B8.)"

If the reader finds his head awash in a sea of floating numbers, do not despair. The main idea is very clear -- growth overwhelmingly benefitted the top earners -- period. 

I find it strange but conclusive that the "58%" figure occurs in both the New Gilded Age report and in my calculation of the CBO report. Perhaps it is accurate? But the  CBO report attributes the 58% growth to the top 20%, the EPI report refers it to the top 1%, and the dates are slightly different. Another report from the RAND Corporation shows similar if not exact figures; the conclusion of RAND only reinforces the other conclusions. The Introduction to the RAND study states, "aggregate income for the population below the 90th percentile over this time period would have been $2.5 trillion (67 percent) higher in 2018 had income growth since 1975 remained as equitable as it was in the first two post-War decades." 

The average weekly earnings (converted into annual income) for the 82% of all workers, the nonsupervisory worker, is $54,640 (see BLS Table B.8). RAND says the counterfactual average income would be $91,248/year (67% higher). Social conditions I argue would be much differrent had growth continued to be equally shared. The average household income is around $185,000, believe it or not, but in actual fact the middle-earning household income, the median, was $80,610 in 2023. (Divide national income, $24.472 trillion by 132 million households = $185,000).  

The Federal Reserve provides (here, here, and here) data showing growth between June 1979 and June 2018: 1) Real Disposable Personal Income grew by 102%; 2) Real Gross Domestic Product per capita grew by 93% during the 39 year period, and 3) Real Personal Consumption Expenditures grew by 108%. This is somewhat consistent with the growth figures for post-tax incomes. 

The pre-tax incomes -- not post-tax -- of the 3 groups are shown in Exhibit 3. Comparing the pre-tax with the post-tax shows that the post-transfer distributions were greater in 2018 than in 1979, especially for the lowest 20%, and the tax burden was lower in 2018, especially for the higher incomes. It shows that the pre-tax income of the lowest 20% in 1979 was $16,100, and post-tax it was $19,700, a gain of $3,600 or of 22%. This changes radically by 2018. The pre-tax average is $19,700 and post-tax it's $37,700, a gain of $18,000 or 95%. While their pre-tax  incomes in 39 years grew by only 40%, from $16.1K to $22.5K, their post-tax income grew from $19.7K to $37.7K, a 91% increase. Government transfers increased greatly for the lower-earning group.   

And for the highest earning 20%, their federal tax rate dropped from 27% in 1979 to 24% in 2018, even though their incomes had increased by 119%, by $132,800,  from $111.1K to $243.9K. I believe the tax cuts occured under Reagan, Bush 2, and Trump. We can check that at this article from the Center for American Progress, "Tax Cuts Are Primarily Responsible for the Increasing Debt Ratio."   

I visualize the economy from the CBO report as the 10 - 20 - 20 - 20 - 70 income distribution economy. Roughly, the lower 20% receives 10 dollars, the next 3 quintiles receive 60 dollars, and the last 20% receives 70 dollars; the total for all is 140. The top 20% receives about half. The CBO report states that the top 20% receives 48% of all post-tax and post-transfer income, and that reflects roughly the 10-20-20-20-70 picture I paint. This is a social disaster, in my opinion, if you hadn't already guessed. 

   The RealTime Inequality Comparison   
Let's compare the CBO's chart with the RealTime Inequality graph. This shows percentage of income growth 1976 to 2018. The top red is the top 10%, the dotted white is the average growth, the blue the middle 40%, and the orange is the lower 50% of households, post-tax and post-transfer income movement. First graph is growth:  

The next shows RealTime's graph on "Average Real Income" for the 3 groups and the dotted white for all groups , 

This graph indicates, 1979 to 2018, the households in the lower 50% grew their real post-tax and post-transfer income by $8,200. The middle 40%, between the 50th and 90th percentiles, grew their incomes by $30,500, and the top 10% grew their incomes by $239,100. This is really grotesque! 

I can't understand how anyone would not be disgusted. 
I understand why many people are disgusted with the status quo. 

The CBO shows the lowest 20%, then the middle 60%, and the top 20%.
The RealTime shows the lowest 50%, then the middle 40%, and the top 10%. 
Both indicate the top income growth and total income levels far surpasses the growth and incomes in the lower-earning household population.   

 I think the above argument and graphs are central to understanding how distressed the U.S. population is about the malfunctioning economy. The lion's share goes to the richest and the crumbs go to the poorest.  

Millions Are Left-Out of Prosperity

            Millions Are Left-Out of Prosperity   

The nation needs to increase, somehow, the incomes of most workers. Every day I deal with workers at stores, shops, offices, banks, etc. who earn too little. For instance, at Walmart stores the median worker’s annual earnings are $27,642 states the report Executive Excess; hourly that comes to $13.30. At O’Reilly’s Automotive it’s $35,806, at Starbuck’s it’s $14,209, at Public Storage it’s $31,827, at Kroger’s grocers it’s $31,302. At fast-food restaurants the average worker earns $31,350 per year. Warehouse workers earn $35,580, and child-care workers $32,050 per year. This is too low.  

The Job Quality Index is a monthly report that compiles the earnings’ level of 82% of the full-time workforce, the full-time nonsupervisory workers. Drawing from data at the Bureau of Labor Statistics it shows that 55% of U.S. full-time workers, about 60 million workers, earn an average of $37,537 per year, equivalent to $18.04/hour. That’s the lower-earning 55%; while the higher earning 45% earn $74,048 per year, or $35.60/hour. The average yearly income for all, 100% of, “nonsupervisory workers” is $54,392. The Bureau of Labor Statistics confirms this number. But in 1972, 53 years ago, the average weekly earnings were $60,476 (see the Fed’s FRED graphs and here), about 10% higher. To repeat, 53 years ago the annual earnings were about 10% higher than today’s earnings, notwithstanding that the entire economy expanded by about 150% (per capita and adjusted for inflation).   

As a result, the extent of U.S. poverty and hardship has been forgotten, or accepted blandly as normal, and is rarely accurately mentioned in media reports. There is a wide gap between what the public imagines and the reality of poverty and hardship. Just as there is a huge gap between those who are well-off and those not-well-off, which is similarly under-reported. I'd like to shed light on the dire state of inequality in this report.  

"Making Ends Meet in 2024", is the title of a regular report from the Consumer Financial Protection Bureau (CFPB), the most recent being November 2024. It shows that 42.3% of U.S. households would be broke in less than one month and not be able to "cover their expenses using savings or borrowing if they lost their main source of income." That shows about 5 out of 12 Americans are living on a shoe-string. And only 26.4% are well-off, about 1 in 4, and could handle expenses for more than six months. Most Americans do not realize how bi-polar we are economically. The average household income is over $180,000 annually (divide the national income of about $24 trillion by the number of households), yet the average pre-tax income for the lower half is around $40,000. (It’s difficult for readers to process numbers, I’ve found. Compare 40 to 180, that’s easier. 40 is what the lower half get, 180 is the potential all could have.) We have very high incomes that pull the overall “mean average” higher. The average household net worth is over $1.2 million; yet the lower half own an average of $60,000, or about 2.5% of all savings, and most of that savings is tied-up in home equity. We may sound extremely rich, but it’s only a mathematical illusion; only 1 in 4 could survive without income for more than 6 months. Prosperity is eluding millions.  

Precarious seems a fair description of this condition; precarity is a way of life for perhaps a majority.  

And 42.9% "had difficulty paying at least one bill or expense in the previous year." (shows page 14 of the CFPB report). And about a third, or 31.0%, of all respondents had difficulty with bills more than 3 times during the past year. About a third of all Americans are skimping and struggling. Details about credit cards and bank overdrafts also show this precarity.   

The CFPB 2017 report asserted in its title that “more than 40% of U.S. adults struggle to make ends meet”. It showed that 24% of adults had less than $250 in liquid assets, and 54% had less than $5,000. (page 80) On reading that I gulped. About a quarter can’t find $250? Wow! Who would guess that the average annual household income is over $180,000, and $1.2 million is the average household savings. Sorry. We live in a dysfunctional society with a media that fails to inform.  

Another report from the United Way charity, published annually, the ALICE report (Asset Limited, Income Constrained, Employed) shows that 42% of adults in 2024 lived with hardship or poverty. It states that the needed annual income for a family of four living in a medium-priced location is $91,284.  (Des Moines Iowa is the location) The Official Poverty Level (OPL) for this size family is (officially) $31,400. Therefore, you will need 3 times the OPL cut-off level to reach the necessary survival budget amount that ALICE recommends. The public is sadly misinformed.  

The Federal Reserve issues an annual report on economic health, the most recent one, the "Economic Well Being of U.S. Households in 2023", shows that 27% of adults went without medical treatment in 2023 because of inability to pay for it; that’s around 67 million adults (p.30). And about 37% of adults said they would be unable to pay off an emergency expense of $400 within 30 days. The fan belt on your car’s radiator blew apart, for instance. Most of the 37% would put it on a credit card and pay installments. Others? They’d stall the payment on their utilities or rent and keep their car running so they could drive to work.  

Our official guide to poverty, the U.S. Census report on poverty, also includes the Supplemental Poverty Measure. The SPM is more realistic because it shows the income distribution among households after taxes have been deducted and after government transfer payments have been added to income. It shows that 41.3% of households have incomes below 200% of the Official Poverty Level (OPL). The SPM shows that 12.9% of Americans lived in SPM poverty (not the OPL 11.1%). These 41.3% should be categorized as the poverty-and-hardship level. Hardship is real. It’s under-appreciated.   

Another U.S. Census survey, the Pulse report for February, 2024, asks "Difficulty paying for usual household expenses in last 7 days?" Results: Very 14%, Somewhat 20%, A little 29%, Not at all 35%. (total 100% with 14% not replying) And "Frequency of not being able to stop worrying" Results: nearly every day--17%, more than half the days--24%, several days--28%, not at all--30%. (with 20% not replying) See Health Table 1, and Spending Table 1. In the first question14% and in the second question 20% did not reply. I report the percentages of those who answered.

Again, only 35% could pay "usual expenses" without difficulty. And only 28% were worry-free. My reaction is that there's a severe plague of worry. I've never gone days upon days worrying without being able to stop.

We have other institutions and academic studies reporting much different poverty levels than the OPL. They provide income floors below which it’s not possible to escape hardship. Comparing three of these report’s minimum-needed income levels, or survival floors, we can judge how inadequate the OPL measure is. The examples include the "survival budget" from the United Way's ALICE report, and the "Family Budget Calculator" (FBC) from the Economic Policy Institute, and of the "Living Wage" calculator from Massachusetts Institute of Technology (MIT). These three studies quantify the necessary incomes needed to survive; incomes below them indicate the hardship levels. 

The question I'm pursuing is, "How much income is needed to survive relative to 100% OPL amounts)?"  

Below I've listed the Census’s 100% and 200% income amounts needed for the one, two, three and four person households. And below I’ve listed the EPI Basic Budget, the MIT Living Wage, and the ALICE Survival Budget.  

Household size: 

             1 person  2 person       3 person       4 person   
Census 100% OPL     15,060           20,440                   25,820            31,400 -- 100% OPL  

Census 200% OPL     30,120           40,880                    51,640           62,400 -- 200% OPL 

EPI Family Budget Calculator – minimum necessary income 

              314% OPL -- 47,305          62,230                   84,520       101,044 -- 323% OPL  

MIT Living Wage  

             277% OPL -- 41,745      289% OPL -- 59,113       81,411     99,091 -- 317% OPL 

ALICE Survival Budget                229% OPL -- 46,932                       91,284 -- 292% OPL  

Conclusion: It takes an income that’s double or nearly triple the Official Poverty Level to live a normal, economically secure life. Our political conversation should focus on raising personal and household incomes and savings levels. Millions of our neighbors live with constant anxiety about paying their bills. We should seek to provide economic security to millions who are stressed to the point of despair. The potential of a good society is impossible when the national anthem is "Hard Times, Come Again No More".