Did the 2017 tax cuts really pay for themselves?
Did the 2017 tax cuts really pay for themselves?
Key parts of the 2017 tax cuts expire at the end of this year. The Trump administration really wants to make them permanent. But that would be expensive.
Supporters of a tax cut extension say it would pay for itself. But would it? Did that happen back in 2017?
If you just look at the raw numbers, it does seem like the 2017 tax cuts paid for themselves. From 2018 to 2024, the federal government took in $1.5 trillion more than the Congressional Budget Office had projected.
“About two-thirds of that? Comes directly from inflation,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “But if you adjust it for inflation and look at the real numbers there was no higher-than expected gains.”
So, she said, the increased revenue didn’t come from economic growth driven by the tax cuts. Companies did take in more revenue. But it was because, with inflation soaring, they charged higher prices.
Kimberly Clausing, professor of tax law and policy at UCLA, said businesses did report higher profits on their tax returns.
“Because they’re selling their goods for higher prices but they haven’t already adjusted the wages for their workers so the revenues are going up but the costs aren’t going up as much as the revenues. So that can also drive higher corporate and business tax revenue,” said Clausing.
Clausing said federal tax collection also got a one-time bump in 2022 as investors paid capital gains taxes on soaring stock profits from 2021. Clausing doesn’t think the stars will align this way again. So, she said, an extension of the 2017 tax cuts would not pay for itself.
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