International Journal of Social Science and Business (IJSSB)

In December 2017, President Trump signed into law the Tax Cuts and Jobs Act of 2017 (TCJA). The most significant aspect of TCJA was cutting the Corporate Income Tax (CIT) rate from 35 per cent to 21 per cent or by 40 per cent. This was the highest reduction of CIT in the history of the United States. The other land mark of tax cut in the United States occurred during the Reagan era between 1981-86. By enacting the Economic Recovery Tax Act of 1981 (ERTA) and the Tax Reform Act of 1986 (TRA), President Reagan slashed the top income tax rate by 60 per cent – from 70 per cent to 50 per cent in 1981 and from 50 per cent to 28 per cent in 1986. Tax cuts in general, and the TCJA in particular have many implications, most significant being its impact on inequality. According to Organization for Economic Cooperation and Development (OECD) data, United States possesses the worst record of all OECD countries in terms of reducing income inequality. Early studies indicate that the TCJA would exacerbate income inequality. In so far as job growth is concerned, studies show that tax rate increase helped growth of jobs significantly more than tax cuts. In this paper, we analyze the early effects of the TCJA, job growth and inequality in relation to tax cuts occurring during 1981 to 2017.