Chairman Paulsen Delivers Opening Statement:
"Tax Cuts and Jobs Act put America on a much stronger economic footing"
Opening a Joint Economic Committee hearing on the positive growth effects of the recent tax law, Chairman Erik Paulsen, R-Minn., pointed to the mounting evidence that the Tax Cuts and Jobs Act is moving the economy in the right direction. Wages, business investment, and optimism are growing at a fast pace, he argued.
The full statement appears below. To watch the hearing, click here.
Most economists say that it’s too soon to know how the Tax Cuts and Jobs Act will affect our economy. I agree with them.
That’s because tax reform wasn’t designed to give a short-term “sugar rush” to the economy. It was intended to improve the levers that drive economic growth—more work, more capital, and more productivity—so that in the long run, American workers and families enjoy more prosperity and opportunity.
The evidence shows that this is already beginning to happen.
As Federal Reserve Chairman Jerome Powell put it, “The economy is doing very well.”
The Bureau of Economic Analysis recently revised upward its estimate of GDP growth to 4.2% in the last quarter.
Survey after survey shows business optimism is surging.
Individual tax relief has allowed people to keep more of their hard-earned money so that it’s worth it to work hard, find a job, and keep reaching for that next opportunity.
By investing in individuals and those who employ them, we’re putting a downpayment on a more prosperous future for all Americans.
After business reforms became law, companies started to invest in their workers and businesses in ways that lead to a more productive workforce. That, in turn, leads to growing paychecks and higher economic growth in the long run.
This reform fought for American workers by attracting investment here at home and encouraging companies to keep high-value intellectual property in America instead of overseas. Profits earned in international markets are returning to the U.S. where it can be invested in greater opportunities for our people.
Though we shouldn’t base the success of tax reform on what’s happening in the short term, we’re already seeing positive effects from these long-term incentives to work and invest.
Business investment—which paves the way for future wage and economic growth—is picking up. After all, an employee’s wages can only increase following the decision by a business to invest more in its workers and company. We want that to be an easy decision.
Since the Tax Cuts and Jobs Act became law, business investment has outperformed similar periods in 2017 and far exceeded the weak and sometimes negative growth in the final year of the Obama Administration.
This chart comparing second-quarter growth rates shows how much business investment has increased in the last two years compared to the last year of the Obama Administration.
In fact, since tax reform became law, we’ve seen an average growth rate of 10 percent so far this year. This is great news.
Yes, it will take time for tax reform to have its full effect on investment and wages.
Yet the Congressional Budget Office noticed rising wages in its latest report on federal revenues. JEC economists also analyzed 21 different measures of wage growth and inflation and 20 of 21 showed real wages rising faster during this Congress and Administration than during the Obama-era recovery.
Small business owners are also seeing benefits, with small business optimism, new hiring, worker pay increases, and investment plans near record highs.
And for those who claim that tax reform only benefits the wealthy, there is great news for the Americans who struggle the most in a weak economy—those with less education, minority workers, and people with disabilities.
Unemployment is at the lowest level since the year 2000, but the untold story is that it is falling faster for these disadvantaged groups than for other groups that tend to do well.
It’s also worth noting that the Joint Committee on Taxation found that during the time individual tax relief from the Tax Cuts and Jobs Act is in effect, the greatest percentage tax cuts will go to those with incomes between $20,000-$50,000 and that millionaires will pay a larger share of the federal tax burden with tax reform than they would without it.
Tax reform was just a first step. We should continue to improve our tax code to meet the challenges of an ever-changing global economy. But the Tax Cut and Jobs Act put America on a much stronger economic footing, which will make many of our nation’s challenges easier to tackle.
I look forward to our distinguished panel of witnesses, including one from my home state of Minnesota.