The tax debate reached the next level as tax cut legislation was introduced in the House of Representatives on Thursday. The bill confirms what we have been warning about for weeks, that lawmakers are considering tax cuts that will add substantially to the national debt.
After months of rumors, outlines and frameworks, the Tax Cuts and Jobs Act is the first piece of real tax legislation produced by the current movement to change the tax code. In accordance with the federal budget passed last week, the bill allows for tax cuts that would increase deficits by $1.5 trillion over a decade. That comes out to nearly $12,000 per American household.
When the gimmicks that hide the true cost of the bill and the additional interest on the debt that would result are factored in, it could add more than $2 trillion to the debt over ten years. Debt held by the public will likely reach the size of the economy by 2028 if the legislation is enacted. And annual budget deficits would eclipse $1 trillion by 2020. See a summary of the bill.
The U.S. needs real tax reform. Done right, comprehensive tax reform can make taxes simpler and fairer while also enhancing our global competitiveness, which will boost the economy. But we cannot afford tax cuts that add to the debt, which will slow economic growth in the long run.
Our partners at the Committee for a Responsible Federal Budget urged Congress to improve the tax package in a statement.
Tax reform is an important national priority that can help grow the economy if done right. We are pleased to see the House put forward a number of serious pay-fors to help finance rate reductions. But given the huge unpaid-for gap remaining, this plan does not constitute true comprehensive, revenue-neutral, and pro-growth reform. It instead is a bill of treats paid for by too many tricks that could harm the economy, not help it – a scary prospect for our country’s future at a time when we already face a dire fiscal state.
With debt higher than any time since just after World War II and trillion-dollar annual deficits slated to return by 2022 under current law, there is no justification to adding trillions more to the nation’s credit card. No credible model shows that tax cuts will create enough growth to fill in the funding gap, and increasing the debt can actually slow economic growth, leaving us in worse shape than before.
We encourage members of Congress to focus on further base broadening, new sources of revenue, spending cuts, or scaled-back rate reduction to pay for this bill. The best and only real chance for tax reform to grow the economy is if it is permanent and fully paid for.
Lawmakers need to hear this message from their constituents.
National Debt and You
All About the Debt