The tax bill lauded by President Donald Trump and congressional Republicans shrunk government revenues by $1.9 trillion, with the promise that the economy would grow enough in the years to come to pay for the cut.
On Tuesday, Rep. Kevin Brady (R-TX), the architect of the tax bill, admitted that this isn’t necessarily true.
When asked in an interview at the Peter G. Peterson Foundation what percent of the Tax Cut and Jobs Act is paid for, Brady acknowledged it’s “hard to know.”
“We will know in year eight, nine, or 10 what revenues it brought into the government over time, so it’s way too early to tell,” Brady said.
He explained that he looked more at payroll taxes and other measures of growth and investment than whether or not the tax cuts paid for themselves. “I don’t think anything could have been worse for the deficit than to stick with the old economy and stick with the tax code that was so outdated, it was actually pushing jobs and investment away from the U.S.,” he said.
KEVIN BRADY says Republican tax law of 2017 is not fully paid for:
“We will know in year 8, 9 or 10 what revenues it brought in … I don’t think anything could have been worse for the deficit than to stick with the old economy and stick with the tax code that was so outdated” pic.twitter.com/fvEiUqiyUj
— JM Rieger (@RiegerReport) June 11, 2019
The Trump administration said before the tax bill passed that any addition to the deficit would be paid for by economic growth.
“We think we can pay for the entire tax cut through growth over the cycle,” former White House economic adviser Gary Cohn told CNBC in November 2017.
Republicans in Congress made the same argument. Rep. Jeb Hensarling (R-TX) said at the time that “The bottom line is we will be able to fill any deficit hole with additional revenues.”
If they had paid attention to several estimates published around the bill’s passage, the fact that the bill, which largely focused on tax cuts for corporations and the wealthy, actually lowered federal revenue would not have been a surprise.
The Joint Committee on Taxation estimated in December 2017 that the bill would add $1.5 trillion to the deficit over 10 years. Trump’s own Treasury Department acknowledged a $1 trillion budget hit even with wildly optimistic assumptions of economic growth. The Congressional Budget Office estimated in May 2018 that the law would add $1.9 trillion over the same period when taking into account $600 billion in debt service costs and a projected $550 billion increase in tax revenue.
“There’s going to be a hundred estimates,” Brady said when he was asked about the CBO estimate, and said he was more optimistic than that.
“The reforms I think in the tax reform area is something I think will even pay off more over time. I still think the best is yet to come.”
Ten years ago, Rep. Brady was not so sanguine. Shortly before President Barack Obama came into office amid the global financial collapse, he introduced a bill that would place an annual spending cap on the federal budget and eliminate agencies wholesale. He argued that these cuts were needed to avoid a situation where future generations will be in an inescapable financial hole.
“We are at a crisis point and Congress just continues to spend like there’s no tomorrow,” Brady said in a press release on January 9, 2009. “Unless we act now to get our financial house in order, families will face higher tax burdens and our grandchildren will find themselves in a deep hole they can never climb out of.”
Ten years later, the nation’s deficit continues to grow, despite the thriving economy trumpeted by the Trump administration and Republicans in Congress.
“The federal budget deficit was $738 billion for the first eight months of fiscal year 2019, the CBO estimates, $206 billion more than the deficit recorded during the same period last year,” said the most recent CBO budget review.
And a recent report by the Congressional Research Service found that the tax bill did not prompt any economic growth that was not already underway from years before Trump came into office. The main effect has been to allow corporations to further enrich their wealthy shareholders, with little benefit to most working Americans.