To boost support for last year’s unpopular tax cuts, Republicans in Congress said the tax changes would help middle-class families and would be paid for by a growing economy.
Neither has come true. Yet congressional Republicans are pushing for another tax cut package. This should finally put to rest their self-proclaimed concerns about fiscal responsibility.
Backers of last year’s tax cut plan said the tax cuts would pay for themselves through increased economic activity. At the time, economists warned that this wasn’t true.
“Not only will this tax plan pay for itself, but it will pay down debt,” Treasury Secretary Steven Mnuchin said last September, as the Trump administration worked to sell the tax plan.
The tax cuts will boost economic growth a little — less than 1 percent — the nonpartisan Congressional Budget Office estimates. But not enough to overcome the loss of federal revenue from the tax cuts.
The federal deficit is expected to be nearly $800 billion by the end of this year. That’s nearly a 20 percent increase over 2017. The deficit is projected to top $1 trillion in 2020, according to the CBO. Over the next decade, the deficit will total more than $13 billion.
The higher borrowing is the result of lower tax collections that were not offset by spending cuts. The amount of corporate tax revenue collected in the first six months of this year was a 75-year low. This has grown the federal deficit much faster than experts predicted, The New York Times reported.
At the same time, Trump has increased federal spending — mostly on the military.
The tax cuts haven’t helped the pocketbooks of average Americans either. For one, corporations mostly used their tax savings to buy back stocks, not to raise wages or to invest in new equipment or plants. Nationwide, wages rose last year, the Census Bureau reported last week, which is good news. But, prices for goods and services also rose, so real wages remain stagnant.
Most Americans will see lower federal income tax bills, but the benefits will flow predominantly to wealthy families. The lowest income earners will see an average of a $60 decrease in their tax bill. Middle income earners will see a $930 decrease, according to analysis by the Urban Institute and Brookings Institution’s Tax Policy Center. The top 1 percent will see $47,550 in tax savings, on average.
One boon of the new tax cut proposal is that it would make permanent reduced rates for individuals, but the benefits would flow mostly to the wealthy. To reduce the cost of last year’s package, tax cuts for corporations were made permanent, but individual reductions are set to expire in 2025.
Like its predecessor, the The new plan has a hefty price tag. It would reduce federal revenues by another $600 billion in the next decade, according to the Tax Policy Center.
Already, Republicans in Congress are using the growing deficit as an excuse to suggest cuts to Medicare and Social Security, setting aside that they exacerbated the shortfall.
Last year’s tax cuts weren’t affordable and didn’t accomplish what their proponents said they would. That’s good reason to reject a new round of tax cuts.
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