Democrats will use a misleading Congressional Budget Office report earlier this month to argue against extending 2017 tax cuts that jump-started the economy . Congressional Republicans would be wise to push back.
Former Vice President Mike Pence is urging them to do just that, writing that failure to renew the tax cuts “would be disastrous for the American people.”
“The Tax Cuts and Jobs Act created instant income growth for hardworking Americans, generated millions of new jobs, and brought back billions of dollars to the United States,” Pence wrote. “Household incomes saw real gains before Bidenomics took effect, and federal tax revenue has never been higher.”
Each of those claims is true. The 2017 bill cut individual income tax rates across the board, increased family tax credits, and, of huge importance, flattened corporate tax rates. It also simplified the tax code while eliminating loopholes.
Most of the cuts are set to expire at the end of 2025. Unless they are renewed, almost every working American effectively will see a punitive tax hike, while expiration of some business tax breaks will cause many firms to raise prices, slash jobs, or both.
Nonetheless, Democrats are touting the new CBO report which, ludicrously, said that renewing the tax cuts will “cost” the U.S. Treasury $4.6 trillion in the subsequent 10 years. The CBO, however, has a long history of ignoring or significantly underestimating the effects of economic growth caused by tax cuts and the effects of economic slowdowns caused by tax hikes. Economic growth creates tax revenue, of course, while slowdowns mean lower revenue than projected. That’s why tax cuts almost never cause the Treasure to “lose” as much income as the CBO projects, and why tax hikes almost never come close to raising as much revenue as projected.
Indeed, total federal revenues actually grew after the 2017 tax cuts were passed. Revenue from individual income taxes grew from $1.87 trillion in 2017 to $1.97 trillion in 2018 and $1.98 trillion in 2019. Revenues dropped only a little despite the pandemic in 2020, and since then have exploded, up to $2.56 trillion in 2023. Even taking inflation into account, revenue has grown by some $240 billion. Likewise, business income taxes now are $457 billion, compared to $339 billion in 2017.
In all these cases, the revenues have exceeded the CBO’s projections. In fact, if CBO had been correct when it revised projections in 2018 to account for a supposed loss in income due to the Tax Cuts and Jobs Act, the federal Treasury would have taken in $1.028 trillion less in the past six years than it did.
Even if the tax cuts don’t fully “pay for themselves,” they don’t “cost” the Treasury the way Democrats, the CBO, and the liberal media claim. Meanwhile, they do tremendous amounts of good. As Pence’s letter noted, in just the first two years after the 2017 tax cuts, average household income rose from $72,090 to $78,250. Inflation after the tax cuts but before Joe Biden became president remained virtually nonexistent while employment soared.
Meanwhile, if Democrats actually are worried about deficits, which they aren’t, they would not let pro-growth tax cuts expire, but instead would reduce spending. All lawmakers need to do is repeal much of Biden’s inflationary spending orgy.
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A recent analysis by the Juniper Research Group shows that Biden’s climate-related giveaways are costing $1 trillion over the next decade and that “undoing” his unnecessary food stamp add-ons would save $425 billion . His student-loan forgiveness programs that primarily benefit the most privileged sectors of the population, if not stopped by the courts, will cost more than half a trillion dollars. Moreover, most of the $1.1 trillion in energy and infrastructure projects that Biden secured through four mammoth bills have not been contractually obligated, so Congress can still rescind it.
The 2017 tax-cut package was one of the wisest laws passed by Congress in years. It should be extended, not abandoned, while Congress concentrates on stopping government from spending so much of the money it takes from taxpayers and from future generations.
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