As federal revenue the past year hit record high levels from individuals and corporations under the current tax code passed by Republicans in 2017, credible news organizations like the Associated Press continue to report exaggerated budget impacts of the Tax Cuts & Jobs Act (TCJA).
In an article today titled “Congress sends Biden $2.5T debt limit hike, avoiding default,” the Associated Press used an outdated analysis by the Tax Policy Center that suggests TCJA was projected to add between $1 trillion and $2 trillion to the national debt.
The Associated Press writes the federal debt “includes $7.8 trillion heaped onto the pile during Trump’s four-year presidency, an analysis of Treasury records shows. The GOP-championed 2017 tax cut is projected to add between $1 trillion and $2 trillion to the debt, according to the nonpartisan Tax Policy Center.”
In contrast, the nonpartisan Congressional Budget Office (CBO) has revised projections of federal revenue upward, finding that higher than expected growth following GOP tax reform would add another $1.2 trillion to federal revenues — a figure covering nearly 80 percent of the original estimated cost by the Treasury.
As Senator Phil Gramm wrote in the Wall Street Journal:
“Before the tax reform took effect the CBO projected that the tax cuts would have only a modest impact on economic growth, and it continues to predict that stagnation lurks around every corner.
“Yet it now has projected in consecutive annual reports that higher-than-expected growth will add an extra $1.2 trillion to federal revenue in the coming decade, covering about 80% of the Treasury’s original projected cost of the tax cuts. If 3% growth is sustained for another year, the growth surge will have paid for the tax cuts.”
Note: The $1.9 trillion American Rescue Plan approved by congressional Democrats in March — unpaid for — was a major driver of the need to increase America’s debt limit to accommodate record levels of federal spending. The San Francisco Federal Reserve also confirmed that the Biden Administration’s $1.9 trillion emergency spending earlier this year boosted inflation.