LARRY KUDLOW: Low taxes are making the American middle class richer

Let’s take a break from the war and follow up on an important economic story, and that is the continued mobility of the great American middle class. There’s a lot more prosperity here than left-wing populist tax-and-spend Democrats would have anyone believe.

Scott Winship of the American Enterprise Institute has a new study showing how the core middle class and lower incomes have been shrinking, because of a boom in the upper middle class. Dual income households have nearly tripled since 1979 to 31 percent from 10 percent, reaching $326,000 a year. The so-called core middle class at just over $100,000 has basically dropped only slightly to 31 percent from 35 percent. In the lower middle class, and poorer incomes, have fallen a bit. I’m going to label this and simplify this near 50-year middle class prosperity period as the relatively low tax rate supply side era. Bookended by President Reagan and President Trump.

Family incomes have been rising across the entire spectrum, especially among women. And other studies show that individual mobility going to the top fifth of earners from people in the bottom fifth has also increased by roughly 50 percent. In other words, a rising tide lifts all boats..

Democrats love to bash supply-side economics as trickle-down. Or hollowing out the middle class, but the data show it’s not true. What’s more, as my pal Steve Moore writes, Trump tax cuts 2.0 are uniquely designed to help the middle class through tax-free tips, overtime, and Social Security. Add to that the Trump accounts which help newborns own a piece of the rock and accumulate wealth no matter who they are or where they’re from, or what color their skin. 

Trump tax cuts 1.0 during his first term disproportionately benefited middle-class blue-collar type wage earners because of the positive impact of lower business taxes. The same is true for Trump 2.0, with its 100 percent immediate cost expensing, and reciprocal fair trade that is channeling a factory building boom, that will be an enormous booster shock to working folks.

Meanwhile, the top 1 percent of income earners pay more than 40 percent of the tax burden, and if you add in state and local taxes from the big blue states like New York, California, and lately Washington State, the most successful earners will be paying half or more of the tax burden. Americans know they are overtaxed. And they also know that more and more of that money is being spent fraudulently in those very same big blue states that overtax in the first place. The GOP can beat history and win the midterms, if they just go out and make the sale.