The former Republican chairman of the House Ways and Means Committee, the chief tax-writing committee of the lower chamber, said on Tuesday that the 2018 tax cuts passed under his tenure might not see returns until a decade out, if then.
Congressman Kevin Brady told a moderator at the Peter G. Peterson Foundation’s annual Fiscal Summit that “it’s hard to know” what percentage of the tax cuts passed by the Republican Party in late 2017 would pay for themselves.
The White House and a broad coalition of Republican officials promised the American public in the lead up to the passage of the Tax Cuts and Jobs Act that the revenue shortfall would pay for itself in made-up economic growth.
The Joint Committee on Taxation, a non-partisan fiscal analysis group commissioned by Congress, found that the bill would add $1.5 trillion to the federal deficit over a 10-year period.
“We will know in year eight, nine or 10 what revenues it brought in to the government over time,” Brady said at the summit on Tuesday. “So it’s way too early to tell.”
Despite the assurances of Republican legislators, the first year of the tax cuts did not appear to yield its promised returns. The Congressional Budget Office reported that for the period covering 2018, when the tax cuts went into effect, revenues fell by $83 billion after adjusting for inflation. The budgetary downturn came despite economic growth of 3 percent, the very kind of catalyst that was supposed to drive up returns to the government’s coffers.
But Brady appeared to take a slightly different tack at the summit than his party with respect to representing the economic rewards of corporate and individual tax cuts. He suggested that it was important to consider factors beyond whether “the tax cuts pay for themselves.”
“Do they pay off, are they a good investment?” he explained. “The signs are early, but they’re very encouraging.”
Brady cited job growth, wage growth and economic investment as positive indicators of an economy that, by most accounts, is humming along.
“I still think the best is yet to come,” Brady observed.
In 2017, President Donald Trump declared “the rich will not be gaining at all” from the tax cuts he spearheaded, but the results of the policy paint a much different picture. According to an analysis from the Tax Policy Center, the tax cuts may have actually increased economic inequality in the United States.
The non-partisan think tank estimated that the lowest-fifth of income earners saw their after-tax earnings grow by less than a half of one percent because of the Republican bill. The second-lowest tier grew their incomes by just over 1 percent. Further shares of income earners saw marginally bigger increases. The top 20 percent of income earners, however, blew away from the rest of the pack, increasing their earnings by nearly 3 percent. This represents faster growth than in any other income bracket.
“I don’t think anything could have been worse for the deficit than to stick with the old economy and stick with the tax code that was so outdated it was actually pushing jobs and investment away from the U.S.,” Brady argued at the summit.