Despite past political promises, extending the 2017 Tax Cuts and Jobs Act won’t cover the cost of revenue loss and could add more to the federal debt.
The latest data from the Congressional Budget Office shows that economic activity may not cover “any of the revenue loss and that TCJA extension might add more to the debt on a dynamic basis, particularly over the long run, than under conventional scoring,” according to the Committee For a Responsible Federal Budget, a nonprofit that tracks federal spending.
Trump wants to extend provisions of the 2017 Tax Cuts and Jobs Act, which the Congressional Budget Office has estimated will cost about $4 trillion over the next decade. The 2017 law lowered taxes for many Americans and businesses, but it is set to sunset in early 2025 without action from Congress.
Plans to extend the tax provisions in the 2017 Tax Cuts and Jobs Act could create fresh inflation, higher interest rates and reduced growth, according to a post-election report from credit-rating agency Moody’s.
Trump has proposed the extension, but hasn’t come up with a way to pay for it. Moody’s noted that higher tariffs on imported goods could generate revenue, but not enough to cover the cost of the tax cuts.
“It’s unclear how the tax cuts will be paid for – and thus it is unlikely that they will,” Moody’s analysts wrote in the report. “Revenues raised from the higher tariffs will help defray their costs, but the tax cuts will be largely deficit-financed.”
Congress has run a deficit every year since 2001. In the past 50 years, the federal government has ended with a fiscal year-end budget surplus four times, most recently in 2001.
