(Official Washington Examiner editorial, May 18) 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, crafted and passed by then-Speaker Paul Ryan, 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…. [The full editorial is at this link.]
