It’s Official: The Trump Tax Cuts Didn’t Pay for Themselves in Year One

In the summer of 2017, for example, the budget office projected that the economy would grow by 2 percent in the 2018 fiscal year, and that personal, corporate and payroll taxes would add up to $3.24 trillion. Then the tax cuts passed, growth accelerated and, for the 2018 fiscal year, tax revenues fell $183 billion — or 5.6 percent — short of that projection.

Republicans, particularly in the Trump administration, sold the tax law on claims that it would pay for itself — even when economists outside the administration, like the congressional Joint Committee on Taxation, released models contradicting them. As corporate tax receipts fell significantly last year, some Republicans began to insist that, in fact, the bill was paying for itself, because total tax revenues were very slightly up.

The 2018 figures contradict that argument, too.

The uncomfortable truth for the bill’s supporters is that the tax cuts are substantially contributing to a widening federal budget deficit, which now appears on track to top $1 trillion this year. If growth fades in the coming years — as many economists believe it will — the cuts could exacerbate the deficit even more.

The best-case scenario for proponents is that the cuts spur a sustained increase in productivity and growth, which in turn produces increasingly higher revenues several years down the road — enough to reduce the “cost” of the bill to the budget deficit.

This is, oddly enough, what a lot of economists predicted would happen with Mr. Trump’s cuts, including ones who generally favor tax cuts. Total federal revenues in 2018 came in roughly where the Tax Foundation, a Washington think tank that typically projects large growth boosts from tax cuts, had forecast — which is to say, well below the budget office’s baseline.

Just because the new law helped to increase economic growth, said Kyle Pomerleau, an economist with the Tax Foundation, “it doesn’t mean that it is going to pay for itself.” Mr. Pomerleau said additional growth from the law “will continue to be modest over the next couple of years.”

“That will offset some of the initial cost,” he continued, “but it will still be nowhere near enough to make the tax cut self-financing.”

In December 2017, as Republicans sped the tax cuts through Congress, the Tax Foundation released a projection that the cuts would add about $450 billion to federal deficits over 10 years, after accounting for the additional economic growth it would spur. The group has since redone the analysis, with what Mr. Pomerleau called improvements to its methodology. It now predicts deficits will increase by $900 billion — double its original forecast.



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