The Congressional Budget Office [CBO] just re-estimated its 10-year budget forecast — and lo and behold, they’re raising their tax revenue baseline by $1.9 trillion.
This is the same outfit that has been telling us for years that lower tax rates always reduce tax revenues and increase the budget deficit. But wait a minute: the 2017 Trump Tax Cuts have been in place for over 7 years. So is the CBO now suggesting they were wrong all along by admitting that the Laffer Curve really worked? And lower tax rates produced higher tax revenues? That’s what their new forecast seems to be saying.
In fact, since President Trump’s huge reduction in the corporate tax rate from 35% to 21%, over the past 7 years, corporate tax revenues have essentially doubled. And indeed, throw in the lower personal income taxes and other pro-growth measures, the entire federal tax revenue base has gone up about 50%. So how in the world can the CBO come right back and now say that if the Trump Tax Cuts are simply extended, the 10-year cost is going to be $4 trillion? Cost of what? There’s no cost.
Keep taxes low and revenues will remain high. There will be less tax avoidance and better growth. Laffer’s been right for about 50 years. The CBO’s been wrong for about 50 years. And here they go again, trying to tell us that extending the Trump Tax Cuts is going to increase the budget deficit by $4 trillion because revenues will be lower.
It is absolute nonsense and Republicans in the House, Senate and White House should fight this CBO nonsense. So far, one of the fighters has been Senator Mike Crapo(R) of Idaho — who keeps arguing that if you’re just extending current law, we’re not raising taxes or lowering taxes. There’s no $4 trillion new deficit. But if the tax bill is not extended, then you’ll have a $4 trillion tax hike and that will over time make the budget deficit even worse. Mr. Crapo calls it current policy and hopes the Republicans will fight to officially change budget rules.
There is precedent. In 2012, Congress and President Obama extended the George W. Bush tax cuts by using the current policy argument which assumed that the Bush tax cuts would continue — not expire. Mr. Crapo has said time and again that the CBO doesn’t score permanent spending increases as hiking the deficit every year — and therefore they should not score permanent tax increases. Otherwise, the whole federal fiscal system is like a pinball machine on permanent tilt: always promoting higher taxes, higher spending, and even higher deficits.
Republicans should work hard to reduce unnecessary and counterproductive federal spending. They should shrink the size and scope of government. But if they let the tax cuts expire, they’re going to find themselves with a terrible economy and higher deficits at the same time.
It’s a lose-lose.
Mr. Trump said we should never get tired of winning. Let’s start by extending the Trump Tax Cuts and growing the economy by 3- or maybe even 4% per year.
Call it the blue-collar boom.
House, Senate, and White House Republicans need to make sure we extend the Trump tax cuts
