Despite CBO’s Predictions, Trump Tax Cuts Were a Boon for America’s Economy and Working Families
WASHINGTON, D.C. – House Budget Committee Chairman Jodey Arrington (R-TX) along with Ways and Means Committee Chairman Jason Smith (R-MO) issued the following statement after the Congressional Budget Office (CBO) issued their latest Long-Term Budget Outlook Under Alternative Scenarios for the Economy and the Budget, which includes CBO’s estimation of the budgetary and economic impact of making the 2017 Trump tax cuts permanent:
“While the Congressional Budget Office provides a valuable service to the Congress, its track record in predicting the economic and fiscal outcome of the 2017 Trump tax cuts is poor to say the least. It’s troubling that the CBO issued a report intended to help policymakers make decisions about future legislative initiatives without ever asking the policymakers they are trying to help for input. Without this input, the studies and analyses are less helpful in the decision-making process and give the appearance of policies being cherry picked for analysis.
The truth is, the Trump tax cuts resulted in economic growth that was a full percentage point above CBO’s forecast, and federal revenues far outpaced the agency’s predictions. In fact, under Trump tax policies in 2022, tax revenues reached a record high of nearly $5 trillion, and revenues averaged $205 billion above CBO predictions for the four years following implementation of the law.
Beyond what the Trump tax cuts did for economic growth and federal revenues, it provided major benefits to working families. The officially reported poverty level fell to its lowest rate in 50 years and unemployment rates for minorities and those without a college degree hit all-time lows. Real median household income rose by $5,000, and wages went up by nearly 5 percent. Americans earning under $100,000 saw an average tax cut of 16 percent. And while the tax burden on low-income families went down, the top one percent saw their share of federal taxes go up.
On the other hand, President Biden's promise for the expiration of the Trump tax cuts, means a family of four making $75,000 today will owe Uncle Sam an extra $1,500 in taxes. The Child Tax Credit will be slashed in half; small businesses will see their tax rates top 40 percent; and farmers may have to weigh selling the family business to pay a rising death tax. In his budget, President Biden has called for upwards of $7 trillion in new taxes. Republicans believe working families do not need the IRS taking any more out of their pockets, especially at a time when they are already paying for the nearly 20 percent increase in prices under ‘Bidenflation.’ That is why Ways and Means Republicans established tax teams that are looking to build on the success of the Trump tax cuts to keep taxes low for working families and small businesses and to produce the same sort of dynamic economy that CBO sadly failed to predict.”
Key Facts:
- In fiscal year 2022, federal tax revenues reached a record-high of $4.9 trillion – $1.6 trillion or 48 percent higher than when the Trump tax cuts were passed and $884 billion higher than CBO’s projections for 2022.
- Corporate tax revenues reached a record-high of $425 billion – $128 billion or 43 percent higher than when the Trump tax cuts were passed and $72 billion higher than CBO’s projections for 2022.
- Individual tax revenues reached a record-high of $2.6 trillion – over $1 trillion or 66 percent higher than when the Trump tax cuts were passed and $642 billion higher than CBO’s projections for 2022.
- On average, revenues increased $205 billion per year over CBO’s projections.
- In the first two years after passage of the Trump tax cuts, GDP growth was a full percentage point higher than CBO’s pre-TCJA forecast.
- According to the White House Office of Management and Budget, every additional one percent of sustained GDP growth will result in $600 billion in new revenues over 5 years and $2.8 trillion over 10 years.
- Following passage of the Trump tax cuts…
- Real median household income rose by $5,000 – a bigger increase in just two years than in the prior eight years combined.
- Wages increased 4.9 percent, the fastest two-year growth in real wages in 20 years.
- The poverty rate and unemployment rate reached their lowest levels in 50 years, with all-time lows in unemployment among African American and Hispanic workers, and those without a high-school degree.
- The bottom 20 percent of earners saw their federal tax rate fall to its lowest level in 40 years.
- Americans earning under $100,000 received an average tax cut of 16 percent.
- The share of taxes paid by the Top 1% of households increased while the tax burden paid by lower income earners decreased.
- Allowing the Trump tax cuts to expires will mean higher taxes on working families and businesses, including…
- A family of four earning $75,000 will owe an additional $1,500 in taxes.
- A family of five with two earners making around $100,000 will owe an additional nearly $7,500 in taxes.
- The Child Tax Credit will be slashed in half from $2,000 down to $1,000.
- The guaranteed deduction that 90 percent of taxpayers use to simplify their tax filing will be slashed in half.
- The 20 percent deduction that helps small businesses compete with larger corporations goes away leaving small businesses facing a 43.4 percent tax rate.
- There have been no changes to CBO’s methodology to address other miscalculations…
- For fiscal year 2023, CBO under projected the budget deficit by $1 trillion.
- The green tax provisions in the Inflation Reduction Act (IRA) were originally estimated to cost $400 billion through FY 2031. This has since been revised up by two-thirds, to about $660 billion through FY 2031 or $790 billion through FY 2033.
