Elena Patel on the 2017 Tax Cuts: Impacts and Implications
The 2017 Tax Cuts and Jobs Act (TCJA) marked a turning point in U.S. tax policy, significantly lowering corporate tax rates and introducing a temporary deduction for small-business owners. But as the act’s provisions approach their 2025 expiration, debates about its long-term effectiveness are heating up.

Elena Patel, the Sorenson Assistant Professor in the Division of Quantitative Analysis of Markets and Organizations at the University of Utah’s David Eccles School of Business, who specializes in corporate and business taxes, appeared in a Wall Street Journal “news explainer” video and offered a critical perspective on what these cuts accomplished — and for whom.

The Pass-Through Deduction: Boom or Bust?
One of the most notable provisions of the TCJA was Section 199A, which granted a 20% deduction on qualified income for pass-through businesses. These include small- and medium-sized businesses that report income through individual tax filings rather than corporate ones. While this deduction was touted as a catalyst for growth (“This is a huge boom for growth for these businesses,” former Treasury Secretary Steven Mnuchin claimed when the law passed), Patel suggests the reality may be far less impactful.

“There’s little evidence that this deduction helped boost investment or employment,” she explained, noting that the provision largely benefited higher-income individuals. “People who own pass-through businesses tend to be higher income, so of course, the benefit disproportionately accrued to the top 1%.”

This skewed benefit has fueled criticism that the deduction was less about supporting Main Street businesses and more about enriching the wealthiest Americans.

The Cost of Extension
As lawmakers debate extending the deduction, the stakes are high. Renewing the provision could cost nearly $700 billion in federal revenue over the next decade. Rep. Jason Smith (R-Mo.), warned of dire consequences for small businesses if the tax break expires: “We will see even more ‘closed for business’ signs up and down Main Street.”

But Patel counters with a broader concern: “To fully extend everything is going to cost something like five and a half trillion dollars. That’s a lot of money.”

With no clear evidence that the deduction has spurred meaningful economic growth, the justification for its continuation becomes increasingly tenuous.

Implications
Critics of the 2017 tax cuts have long argued that they disproportionately benefit the wealthy. Patel’s analysis underscores this point. While the deduction was publicly pitched as providing relief to small-business owners, it instead often served as a windfall for those already at the top of the income scale.

“This tax cut really was targeted at the richest of the rich people in the United States,” Patel said.

For policymakers grappling with issues of equity and revenue shortfalls, the deduction’s track record raises important questions about its efficacy and fairness.

Looking Ahead
As the TCJA’s expiration date looms, its legacy remains under scrutiny. Patel’s insights challenge the narrative that the tax cuts delivered broad-based economic benefits, instead painting a picture of targeted relief with uneven results.

“Getting that additional income cost us a lot of tax revenue,” she concludes, emphasizing the trade-offs inherent in such sweeping policy changes.

For taxpayers, business owners, and policymakers alike, the decisions made in the coming months will shape the nation’s fiscal future. The debate over the TCJA is far from over, and as Patel’s work demonstrates, its true impact may not be fully understood for years to come.

Watch the full story here.