The Fiscal Damage Caused by the New Republican Tax Law
The law commonly known as the Tax Cuts and Jobs Act1 (TCJA), enacted in December 2017 by the Republican-controlled Congress, is substantially increasing federal deficits—and will for years to come. Regrettably, the law increased federal borrowing while addressing none of the nation’s most pressing challenges. In particular, after decades of growing income inequality and stagnant real wages for working-class Americans, the law conferred its largest benefits on the wealthiest Americans. The law did nothing to rebuild the nation’s infrastructure, advance education, or prevent climate change. Moreover, by increasing federal deficits and debt, the law will increase pressure to cut vital programs, including Social Security, Medicare, and Medicaid.
This issue brief assesses the fiscal damage from the TCJA and finds:
- The law will increase deficits by about $1.9 trillion over 10 years, according to the nonpartisan Congressional Budget Office (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.