More Tax Cuts, Huge Deficits

Blog Post
Monday, September 24, 2018

The House Ways and Means Committee is looking to pass more deficit-financed tax cuts, most notably by pressing to extend tax cuts passed in 2017 beyond their 2025 expiration dates.

The Congressional Budget Office released a score of that legislation, projecting it will increase the deficit by $631 billion from 2019-2028 and by substantially more over the following years.

The cuts scheduled to expire are those that impact individual income tax rates, the reduction in estate and gift taxes, the increase of the standard deduction, certain limitations on deductions (like the limit on the state and local tax deduction), an increase in the child credit, and others.

Because those don’t expire until 2025, extension has almost no cost in the beginning of the scored period. However, in 2028, extension will add $268 billion to the deficit in just that year. That suggests costs over the second 10-year period after the extensions take effect at close to $3 trillion. Furthermore, that estimate doesn’t include additional interest costs on the added debt.

The CBO did say that they don’t yet have a dynamically scored estimate for the legislation from the Joint Committee on Taxation, but as with their analysis of the initial cuts, it is likely that dynamic scoring will not dramatically alter the estimate that the legislation will lead to large deficits.

As we have said before, there is no good reason for additional, unpaid-for tax cuts. It does seem likely this legislation will not pass the Senate even if it passes the House. However, Congress’s time would be better spent debating real tax reform and the nation’s unsustainable fiscal outlook.

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