Reuters
- Treasury Secretary Steven Mnuchin said in a CNBC interview that President Trump’s 2017 tax cuts will pay for themselves as the administration prepares another plan to reduce them further.
- It’s a claim that first emerged among Republicans in 2017 to sell the Tax Cuts and Jobs Act, which slashed the corporate tax rate.
- But there is consistent evidence that shows the tax cuts make up a significant amount of the federal deficit.
- The Congressional Budget Office estimated the tax cuts piled $228 billion onto the deficit for fiscal year 2019.
- Visit Business Insider’s homepage for more stories.
Treasury Secretary Steven Mnuchin told CNBC on Wednesday that President Trump’s tax cuts will pay for themselves. It’s a dubious claim he’s repeated alongside other administration officials since the law was first introduced in 2017.
But that talking point is emerging again as the White House says it’s designing another plan it’s calling “Tax Cuts 2.0” to unveil later this year in the middle of a competitive presidential election.
In the interview, Mnuchin expressed confidence the tax law would boost economic growth to a sustainable point without adding onto the nation’s $23 trillion debt.
“We’ve tracked the numbers and we’re right on track,” he said.
But at the same time, he said the government needed to do more to curb the rising level of federal spending.
“There’s no question that we need to slow down the rate of growth of government spending, because we cannot sustain these deficits growing at these levels,” he said.
Yet there is consistent evidence indicating the tax cuts are a key reason the deficit is exploding, contradicting Mnuchin’s assessment.
The federal deficit — the gap between what the government collects in tax dollars and its annual spending — has grown in the three years since Trump took office. The deficit for fiscal year 2019 stood at $984 billion, a 26% jump from the previous one.
It’s soaring because the government is collecting fewer tax dollars as a result of the cuts. One study from the Institute on Taxation and Economic Policy, a left-leaning think-tank, released in December suggested corporate taxes are at a 40-year low.
The 2017 Tax Cuts and Jobs Act slashed the corporate tax rate to 21% from 35% and provided temporary benefits for individuals that are set to expire in 2025. Republicans said the legislation would lift annual economic growth to 3% or 4% annually in GDP terms, but that hasn’t been the case so far, and it’s on pace to miss that target for 2019.
The Congressional Budget Office, a nonpartisan federal agency, estimated the Tax Cuts and Jobs Act added $228 billion to the fiscal 2019 deficit and will pile on another $272 billion this year.
The Committee for a Responsible Federal Budget, a nonpartisan organization, recently said the Trump administration’s policies would swell the debt by $4.7 trillion over the next decade. And the tax cuts made up nearly $1.9 trillion alone.
Back in September, the fiscal watchdog also said a claim from House Republicans in a congressional blog post that additional government spending alone was driving the deficit higher — without the tax cuts — was false. Both are.
