Taxes

JCT: Making the GOP’s Tax Cuts Permanent Would Cost $650 Billion

Written by SK Ashby

There's very little chance that congressional Republicans will succeed in making their entire package of tax cuts permanent (the corporate tax cuts are already permanent), but if they do it will make current deficit projections seem quaint.

According to the congressional Joint Committee on Taxation (JCT), the committee that congress relies on for their own analysis, making their entire package of tax cuts permanent would add over $650 billion to the current total of $1.5 trillion.

As the Center on Budget and Policy Priorities (CBPP) points out, however, that's not the whole story. The JCT's estimate only includes the final three years of the current budget window of 10 years.

Making these provisions permanent would cost roughly $650 billion over 2019 to 2028, according to the Joint Tax Committee. Large as it is, this estimate significantly understates the long-term cost because the bill largely affects only the final three years of the 2019-2028 “budget window.” We estimate that the legislation would cost roughly $2.9 trillion over 2026 to 2035, the first full decade it would be in effect.

The revenue loss would come at a time when the baby boom generation will be retiring in large numbers and moving into “old-old age,” causing Medicare and Social Security costs to rise considerably. Indeed, 2026, the year in which most of the new GOP tax legislation would start having effect, is the first year in which all members of the baby boom generation — including the youngest — will be eligible to draw Social Security retirement benefits.

This obviously isn't sustainable over the long term and a future session of Congress will have no choice but to raise taxes even if Republicans fail to make their entire package permanent.

Unfortunately, there's virtually no chance Trump will sign a bill that raises taxes and even if Democrats retake control of Congress they won't have enough votes to override a veto. Any effort to claw back revenue (or do much else) will have to come after Republicans have been removed from the White House in 2020.

This is another topic for another day, but everyone will need to temper their expectations accordingly. Congressional Democrats may be able to regain control of oversight, which is incredibly important and key to stopping Trump's agenda, but there will be little more they can do beyond that point if they win in November. It's basic math.