Congressional Republlicans are seeking to extend Former President Donald Trump's 2017 tax breaks but could add $4.6 trillion to the national debt over 10 years — raising the specter of cuts to Social Security and Medicare, according to a new report.
At the same time, extending the tax cuts would create a $112.6 billion windfall for the top 5% of income earners in the first year alone, according to figures from the Institute on Taxation and Economic Policy cited in last month's report by by the Democcrat-led Senate Budget Committee.
Independent analyses show the economic gains from the Tax Cuts and Jobs Act didn't offset the loss in government revenue and won't do so if they're renewed before next year's scheduled expiration date, Bloomberg reported Friday.
Some of the cost could be made up through a proposal by the presumptive Republican presidential nominee to impose tariffs on imported goods — but that would increase prices for consumers still struggling with post-pandemic inflation, Bloomberg said.
With GOP lawmakers eager to extend the tax cuts as enacted, some conservatives have proposed rolling back Social Security and Medicare benefits over time, reversing President Joe Biden's clean-energy tax breaks, shrinking other tax breaks or scaling back other social programs, Bloomberg said.
Biden has proposed extending Trump's tax cuts only for individuals who earn less than $400,000 and making up the difference by raising taxes on corporations and the wealthy.
Last month, the Congressional Budget Office projected that extending the 2017 tax cuts — which temporarily reduced rates on personal income, large inheritances and many small- and medium-sized businesses — would cost $4.6 trillion over the next decade.
But the so-called dynamic feedback effect on investment, job creation and economic growth would replace no more than 14% of the lost revenues — and as little as 1%, the nonprofit Committee for a Responsible Federal Budget said Thursday, citing analyses from "four different organizations spanning the ideological spectrum."
The law also permanently lowered the corporate tax rate, from 35% to 21%, and Republicans note that revenue from corporate taxes in 2022 and 2023 exceeded CBO projections from 2017, before the tax cuts, Bloomberg said.
That showed the country "does not need" the 35% rate to "generate the revenues that were raised in 2017, " conservative economist and former CBO director Douglas Holtz-Eakin said in an April blog post on the American Action Forum website.
"In this sense, one might argue the rate cut paid for itself," Holtz-Eakin wrote.
But that analysis ignored the increase in corporate profits that came when companies raised prices more than their costs, as well as the Federal Reserve's dramatic cuts to interest rates in response to COVID-19, Bloomberg said.
A 21-page report released Thursday by the nonpartisan Tax Policy Center said that "every credible analysis of fiscal effects" of Trump's tax cuts found they "reduced revenues significantly."
The report also found that investment growth was driven by consumer demand and other factors, and that growth in business formation, employment and median wages slowed after the tax cuts were enacted.
The Tax Policy Center has said the Tax Cuts and Jobs Act will add between $1 trillion and $2 trillion to the ntional debt before the temporary provisions expire at the end of next year.
