GOP leader concedes tax cuts might not pay for themselves
Rep. Kevin Brady, RTexas, a lead architect of the GOP tax bill, suggested Tuesday the tax cuts may not fully pay for themselves, contradicting a promise Republicans made repeatedly while pushing the law in late 2017.
Pressed about what portion of the tax cuts were fully paid for, Brady said it was “hard to know.”
“We will know in year 8, 9 or 10 what revenues it brought in to the government over time. So it’s way too early to tell,” said Brady at the Peterson Foundation’s annual Fiscal Summit in Washington D.C.
The federal government’s deficit typically shrinks during strong economic times, but the deficit is up nearly 40% so far this fiscal year, according to the latest Congressional Budget Office report released Friday.
Spending is up $255 billion for the first eight months of the fiscal year, the CBO said, while revenues are up only $49 billion. Corporate tax receipts are down after Republicans enacted the largest reduction in business taxes in U.S. history. Individual income taxes are basically flat this year (they are growing less than the rate of inflation). Most of the revenue increase is coming from President Donald Trump’s tariffs and more payroll taxes, which were not cut in the tax bill.
“Revenue fell, it didn’t rise, after the tax cuts,” said Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget.
Brady’s comments are a marked departure from the claim many Republicans made during the tax bill debate that the tax cuts would be fully paid for by additional economic growth
that would, in turn, spur additional tax revenues for government coffers.
Numerous independent analyses concluded that the tax bill would add substantially to the U.S. debt, which currently stands at $22 trillion. CBO estimated the total cost of the Tax Cuts and Jobs Act is $1.9 trillion — after taking into account additional growth and interest payments.
The GOP-controlled Senate, the Democratcontrolled House and the White House are currently in the midst of tough negotiations on the 2020 budget plan that is supposed to take effect on Oct. 1. If no agreement is reached, automatic caps will take effect that reduce both domestic and military spending by a total of $125 billion, a scenario few want in the runup to an election year.
House Budget Chair John Yarmuth, D-Ky., said the negotiations are “not going very well” so far.
“I don’t think there would be any problem at all getting Senate and House agreement on funding levels,” said Yarmuth, but he called the White House “unpredictable.”
The expectation is that Congress and the White House will eventually agree to lift spending even higher than it is now for both military and domestic programs. Yarmuth’s proposal would raise spending by about the same amount as the GOP tax cuts for the next decade, according to the Committee for a Responsible Federal Budget.
“There is no center of gravity to reduce spending in this town,” said Mick Mulvaney, Trump’s acting chief of staff at the Fiscal Summit. Mulvaney, a former GOP congressman who pushed back aggressively against President Obama for smaller budgets, called Trump’s budgets the “most fiscally responsible budgets that have ever been drafted.”
But experts disagreed, pointing out that the president’s budgets relied on very optimistic growth assumptions and hefty cuts to domestic programs that were a non-starter in Congress. The budget deficit is up more than 80% so far this fiscal year over the same period in 2016 before Trump took office.