PolitiFact is fact-checking President Donald Trump's State of the Union address Tuesday night. They will be looking at a number of specific claims the president makes in his speech.
"We enacted the biggest tax cuts and reforms in American history."
President Trump repeated in his State of the Union address one of his most frequent talking points — and one that has been repeatedly debunked.
"We enacted the biggest tax cuts and reforms in American history,” Trump said in his address.
Measuring the size of the tax cut is a straightforward task. And as we noted the last time we fact-checked a similar claim, the tax bill passed last December doesn’t stack up as the largest cut ever.
On the eve of its passage, the Joint Committee on Taxation — Congress’s nonpartisan arbiter of tax analysis — said the tax bill would cost about $1.5 trillion over 10 years, or about $150 billion a year.
The Treasury Department has published a list of the biggest tax bills between 1940 and 2012, measured not only by contemporary dollars but also by inflation-adjusted dollars and as a percentage of gross domestic product (a measure of the size of the overall economy).
Depending on what projection of the current bill you use and what yardstick you measure it by, several bills since 1980 were larger. Here’s the list by inflation-adjusted dollars:
Tax bill
Inflation-adjusted dollars (per year)
American Taxpayer Relief Act of 2012 (enacted in 2013)
$321 billion
Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
$210 billion
Economic Recovery Tax Act of 1981
$208 billion
Tax Cuts and Jobs Act of 2017
$150 billion
By this measurement, the recent tax bill ranks as the fourth-biggest since 1940.
The Trump-signed legislation falls lower on the list when the cuts are ordered from highest to lowest as a percentage of GDP:
Economic Recovery Tax Act of 1981
2.89 percent
Revenue Act of 1945
2.67 percent
Revenue Act of 1948
1.87 percent
American Taxpayer Relief Act of 2012 (enacted in 2013)
1.78 percent
Revenue Act of 1964
1.6 percent
Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
1.31 percent
Tax Cuts and Jobs Act of 2017
0.9 percent
By this measurement, the recent tax bill ranked seventh.
The Committee for a Responsible Federal Budget has noted that an even earlier tax cut from 1921, not included in the Treasury Department analysis, accounted for 1.1 percent of GDP.
The group added in a blog post that "if President Trump wanted to pass a tax cut that exceeds the record 2.9 percent of the economy in 1981, it would cost roughly $6.8 trillion over ten years."
We rate Trump's statement False.
“Since we passed tax cuts, over 3 million workers have gotten tax cut bonuses — many of them thousands and thousands of dollars.”
Trump’s numbers match a compilation by Americans for Tax Reform, a group started by anti-tax crusader Grover Norquist. Americans for Tax Reform advocates against tax increases and supported the Tax Cuts and Jobs Act that Trump signed into law in December.
Americans for Tax Reform used company press releases and media reports to compile a list of announced bonuses or other financial benefits. The group found that as of the day of Trump’s State of the Union speech, at least 3 million Americans are receiving special tax reform bonuses.
American Airlines, FedEx, Home Depot, Nationwide Insurance, Walmart and Walt Disney Company were among the companies that announced bonuses.
In total, at least 286 companies have announced wage and salary increases, bonuses, or 401(k) match increases, or in the case of public utility companies, lower rates.
Trump said that “many” of the bonuses are “thousands of dollars per worker.” But it appears that the majority of the company announcements were for bonuses of $1,000 or less. The list includes about nine companies that announced bonuses of $2,000, including Fiat Chrysler’s 60,000 employees.
Some companies were very clear about who deserves credit for the bonus.
The Hammock Source in North Carolina was one of many companies to announce employee bonuses following the passage of the tax bill. The company handed out the bonuses in envelopes that said, “Trump Republican tax reform bonus.”
Experts say that Trump’s claim is lacking important context.
The bonuses only affect a small percentage of American workers.
Willis Towers Watson, a global human resources consulting firm, surveyed 333 large and midsize employers in January to ask about their plans related to the tax bill. The survey showed that about 6 percent said they provided profit sharing or a bonus in 2017 and 5 percent planned to do so in 2018, while 10 percent were considering it. A slightly smaller number had given wage increases or planned to do so.
A Reuters/Ipsos poll showed 2 percent of U.S. adults said they had gotten a raise, bonus or other additional benefits due to the tax law. The poll was conducted of 5,254 adults Jan. 12-23.
Economists say it will take more time to fully assess the economic impact of the tax reform bill. Labor trend experts said that amid a tightening labor market and low unemployment, companies have been trying to use different compensation and rewards to attract and retain top talent.
Andrew Chamberlain, chief economist at Glassdoor, told PolitiFact that one-time bonuses are a low-risk way for companies to pass on some expected benefits of the tax bill to workers without being on the hook for sustained higher base wages.
“In this hiring environment, plans for pay increases are likely to have already been in the works, and the passage of the recent tax bill may simply have been the occasion for announcement rather than the cause,” he said.
The news coverage following the new tax policy may have led some employers to announce pay or benefit changes in an effort to stay ahead of competitors.
“This is not to say the tax bill hasn’t affected recent decisions to raise wages at all, but the full impact of tax reform on the job market is something that we’ll only know in time – years or even a decade from now,” Chamberlain said.
Brian Kropp, HR practice leader at Gartner, an information technology research and advisory company, told PolitiFact that companies have been trying to use different compensation and rewards to attract and retain top talent.
“While, it is true that some companies have used the tax cut to provide bonuses for employees, the majority of companies had already been increasing, or planning to increase rewards, well before the tax cut,” he said.
Companies announcing bonuses by the end of 2017 do get a tax advantage of claiming a deduction in that tax year, Urban Institute-Brookings Institution Tax Policy Center co-director Eric Toder told PolitiFact.
“A payment in 2017 would be deductible at a 35 percent rate; the same payment in 2018 would be deductible only at the new 21 percent rate,” Toder said. “My understanding is companies would only have had to announce the bonus by the end of 2017 to claim the deduction in tax year 2017; they would not literally have had to send out the checks.”
Any surge in bonus payments now probably says little or nothing about how the corporate tax cuts will affect wages in the long-run, Toder said.
