RELEASE: As U.S. House Prepares to Vote on Yet More Tax Breaks and Extenders, New CAP Brief Highlights Fiscal Damage Stemming From the Tax Cuts and Jobs Act
Washington, D.C. — As the U.S. House of Representatives prepares to vote on a tax bill that would increase deficits by $55 billion by giving out new tax breaks and extending existing ones, a new issue brief from the Center for American Progress assesses the fiscal damage stemming from the Tax Cuts and Jobs Act (TCJA). As CAP’s brief notes, the law, which was enacted nearly one year ago, dramatically increased federal borrowing while failing to address any of the nation’s most pressing challenges—such as rebuilding the nation’s infrastructure, advancing education, or preventing climate change.
Tax cuts in the TCJA are largely tilted to large corporations and the wealthiest Americans and hugely increased federal deficits and debt. However, President Donald Trump and congressional Republican leadership have blamed exploding deficits on Social Security, Medicare, and Medicaid and have called for deeply harmful cuts to these vital programs.
“After increasing deficits by nearly $2 trillion—and in all likelihood much more—House Republicans are back at it, pushing through a special-interest-laden tax bill that would add another $55 billion to deficits,” said Seth Hanlon, CAP senior fellow and co-author of the brief. “Congressional Republicans dug a bigger hole that they intend to fill with cuts to Social Security, Medicare, Medicaid, and other programs that regular Americans rely on. They need to put down the shovel.”
The tax bill the House is expected to vote on soon will increase deficits by another $55 billion, according to the Congressional Budget Office (CBO). The bill extends temporary tax provisions including for various special interests, provides new tax breaks, and making so-called technical corrections to address problems created by the rush to pass last year’s tax law.
CAP’s brief examines the fiscal damage caused by the TCJA and found:
- The TCJA will increase deficits by about $1.9 trillion over 10 years, according to the nonpartisan CBO. This increase would constitute major fiscal damage. If core features of the law are extended, the TCJA would increase deficits by another $650 billion over 10 years and add roughly $3 trillion to deficits over the second decade after enactment.
- The law has already drained revenue and thus hiked deficits. Indeed, the TCJA was the biggest contributor to the large increase in the deficit for the fiscal year that ended in September 2018.
- The law could cost much more than official estimates because it includes numerous fiscal time bombs, including expiring tax cuts that future Congresses could extend and delayed tax increases that future Congresses could further forestall. The law is also replete with loopholes that are already being exploited in ways that were not fully recognized during the bill’s hasty consideration.
CAP’s brief notes that wealthy individuals and corporations are the law’s biggest beneficiaries, and it is no coincidence that they will have many opportunities to stretch the law’s myriad loopholes even further and press Congress for even more tax breaks. CAP’s brief also outlines the following recommendations to mitigate and reverse the fiscal damage from the TCJA:
- Stop extending tax breaks. Congress should stop extending tax breaks, including the new ones that the TCJA created, without offsetting the revenue loss. Congress should also resist pressure to further delay revenue-raising provisions or address supposed errors in the TCJA by expanding tax breaks without offsetting the resulting costs.
- Prevent tax evasion by strengthening the IRS. Congress must strengthen the IRS’ ability to prevent tax avoidance. The complexities and special tax breaks in the new law will reward those with resources to exploit them and those who are most willing to push legal boundaries. Congress should significantly boost the IRS’ budget, including its enforcement resources, to minimize the revenue loss from the TCJA and protect the integrity of the tax system.
- Reverse the tax breaks for those who need them least. Future Congresses must fundamentally restructure the TCJA to reverse all of the tax cuts for the wealthy and corporations, end egregious loopholes such as the passthrough deduction, and raise revenue to meet national challenges.
Click here to read: “Rising Deficits, Falling Revenues: The Fiscal Damage Caused by the New Republican Tax Law” by Seth Hanlon, Alan Cohen, and Sara Estep.
For more information or to speak with an expert, contact Allison Preiss at firstname.lastname@example.org or 202.478.6331.