One huge reason that tax reform could be easier than it should be.
House Republicans have giddily greeted the GOP’s tax reform proposal thus far, with some lawmakers suggesting they’re ready to pass a yet-to-be written bill as soon as they get their hands on it. But that enthusiasm shouldn’t be a shock when the Republicans making the laws falsely believe one thing ― that tax cuts pay for themselves.
Yes, tax cuts can create economic growth, which can in turn increase revenue. But recent history has shown that tax cuts aren’t without a cost. If you’d like a lesson in the matter, ask Kansas.
Or just look at the 2001 and 2003 tax cuts under former President George W. Bush.
Rather than paying for themselves or unleashing the economy, the Bush tax cuts significantly contributed to increases in the deficit. According to the Center on Budget and Policy Priorities, the Bush tax cuts will be responsible for 40 percent of our national debt by 2019. And there isn’t clear evidence that those tax cuts created economic growth ― certainly not enough to offset the cost of the cuts.
Even the CBO’s most modest analysis, excluding the effect of having to pay interest on extra debt, said the 2001 tax cuts contributed more than a trillion dollars to the national debt in their first 10 years.
When HuffPost talked to conservative economist Douglas Holtz-Eakin about the deficit impact of tax cuts on Thursday, the former CBO director was emphatic: Tax cuts do not pay for themselves.
“We have all sorts of evidence to that effect,” Holtz-Eakin said. “I don’t think there’s any evidence, over any interval, that they pay for themselves. Over any sustained period, they don’t.”
Former Ronald Reagan economic adviser Bruce Bartlett, who helped write Reagan’s tax cuts and literally wrote the book on Reaganomics, published an op-ed in the Washington Post on Thursday titled: “I helped create the GOP tax myth. Trump is wrong: Tax cuts don’t equal growth.”
Bartlett said most Republican rhetoric about tax cutting is “wishful thinking.”
“In reality,” Bartlett wrote, “there’s no evidence that a tax cut now would spur growth.”
But that thought would come as a surprise to most House Republicans, who are apparently convinced that tax cuts do create growth and do bring in more money than they cost.
While we don’t have enough specifics to know the price tag of the GOP’s latest proposal, it seems clear there won’t be enough offsets on the individual side to make up for the cuts that Republicans are planning, particularly because Republicans believe they don’t need to offset cuts. Under that ideology, a good bet is that the proposal, if enacted, would substantially contribute to the national debt.