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I have a B.S. My first observation is this: There is way too much attention being paid to the budgetary effects of the tax cuts and not nearly enough attention being paid to the broader macroeconomic effects.
The bottom line 2018 deficit number is significant because it occurred during good economic times, when the federal deficit typically falls rather than spikes. You can read diverse opinions from our Board of Contributors and other writers on the Opinion front page, on Twitter @usatodayopinion and in our daily Opinion newsletter. But that's not the most important story. So what if the reductions add to the deficit? It seems highly unlikely that dropping the tax rate from 35% to 21% will spur enough additional sales and/or lower expenses to increase pre-tax profits by 67%.
The actual amount Treasury reported Monday was $202 billion less. That will increase it even more. The right comparison is the total tax revenue the government would have collected under the old tax law versus the new one. Given the federal government’s overall $113 billion deficit increase, you might assume that the deficit rose because spending was $127 billion higher. Below I’ll provide some examples of companies and how much less in taxes they have reported for the first half or three quarters of 2018. Fixes description in the 11th paragraph of a chart on tax cuts and jobs. The tax cuts, which add nearly $2 trillion in fiscal stimulus, are projected to result in only a modest — and temporary — increase in inflation. Stephanie Kelton is a professor of public policy and economics at Stony Brook University. Biden and Congress continue to argue that if Trump and the GOP did not cut the tax rate 10% to 9%, tax revenue would have totaled $120 ( $1,200 times 10%). It will take a few years to get a complete read on the tax bills impact. Note that individual tax receipts actually increased from $1,587 billion in fiscal 2017 to $1,684 billion in fiscal 2018, higher by $96 billion or 6%.
Companies are reporting lower taxes on higher income. The underlying and incorrect assumption here is that income would have increased to $1,200 without the tax cut. Before it's here, it's on the Bloomberg Terminal.
The national debt and the federal deficit are related because the national debt is the accumulation of each year's deficit. Math doesn’t work for the tax bill to be “revenue neutral”. This comparison, to tax revenues that were expected had the laws stayed the same, unambiguously shows that virtually all of the federal deficit increase that occurred from 2017 to 2018 was because of the new cuts in corporate and individual taxes.
Third, unlike the recession-caused trillion dollar federal deficits of the Obama years that fell precipitously when the economy improved, these deficits are the result of permanent changes in federal revenues caused by the tax law.
Second, not content with how much they’ve already increased the deficit, Congress and the White House are seriously considering passing another big tax cut during the lame duck session after the midterms. Here is an example of the calculations for corporations tax payments to be the same. To respond to a column, submit a comment to [email protected]. The House passed this bill just before it recessed for the midterm elections, and the scuttlebutt I hear from budget insiders is that Republican leaders are seriously considering misusing the congressional budget process so no one may filibuster the next deficit increase. While companies actual cash tax payments are not the same as what is reported in the GAAP financial statements, there is a linkage between what they say they owe and what they wind up paying over time.
You, Probably. The tax cuts, which add nearly $2 trillion in fiscal stimulus, are projected to result in only a modest — and temporary — increase in inflation. This gets lost in the discussion because virtually everyone is focused on the budgetary effects.
In total, CBO projects that the cumulative increase in the deficit through 2028 due to the tax cuts will be approximately $1.9 trillion. Below are the tax receipts from corporations to the U.S. government over the past five fiscal years. Last week, Mnuchin said it was the Democrats’ demand for more spending on health care and education that was the sole reason the deficit was increasing. You may opt-out by. It is Treasury, the department he leads with a staff that reports to him, that has exposed the tax law as the real reason the federal deficit is increasing so steeply. GOP tax cuts are expanding the deficit. According to the Congressional Budget Office, the tax cuts give us a better economy from 2018-2028 for the simple reason that they boost the after-tax incomes of households and businesses. Before joining Atlantic Trust I was the Internet Security Software analyst for Smith Barney (where I authored the most comprehensive industry report “Internet Security Software: The Ultimate Internet Infrastructure”) and an Enterprise Server Hardware analyst at Salomon Brothers. For the corporate portion to be “revenue neutral” at 21% vs. the previous 35% rate companies’ profits will have to increase by 67%.
All Rights Reserved, This is a BETA experience. Is that something to be up in arms over? As they almost always do, Democrats are crying foul over lost federal revenue and blaming Republicans for “blowing a hole in the deficit” with their massive cuts. I want to make six observations about the current fight, but I want to do so in a series of short, digestible posts. © 2020 Forbes Media LLC. This is a review of Trump’s Economic Scorecard before the midterm elections. A Coronavirus Vaccine Is Coming, So Who Gets It First?
Treasury said revenues grew from 2017 to 2018 by slightly less than $14 billion. A simple analysis of what Treasury reported shows that virtually the entire deficit increase was because the tax cut enacted in December reduced revenues substantially. Treasury’s projected 2019 deficit would be just above $800 billion rather than close to $1.1 trillion. They ranged from $297 billion in fiscal 2017 to $344 billion in fiscal 2015, and were essentially flat in fiscal 2016 and fiscal 2017. Senate Majority Leader Mitch McConnell laid it out in a Bloomberg News interview last Tuesday: It’s a bipartisan problem: Unwillingness to address the real drivers of the debt by doing anything to adjust [Social Security, Medicare and Medicaid] to the demographics of America in the future. Companies such as Apple, Intel and JP Morgan reported higher income in the first half or three quarters in 2018 but all showed substantially lower tax provisions and rates. Stan Collender teaches federal budgeting at the McCourt School of Public Policy at Georgetown University and is the founder of thebudgetguy.blog.
Mnuchin and Mulvaney should both be embarrassed by these obvious attempts at budget misdirection, but Mnuchin should be especially ashamed. You often hear people complain that deficits are “evidence of overspending.” It’s taken as de facto proof that the government is behaving “irresponsibly” or “living beyond its means.” But economists know (or should know) better. But rarely are they proven so false so fast as Donald Trump's claims about tax cuts and deficits.
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