The Congressional Research Service (CRS), a non-partisan arm of the Library of Congress, has taken a deep dive into President Donald Trump’s signature tax cuts. While the Republican Party promised that the tax cuts would cause a dramatic increase in wages and spur corporate investments, the CRS found little evidence of either occurring.
Further, with public debt having surged to historical highs in recent years, paying for the tax cuts has been a major concern. Many Republicans had argued that an increase in economic growth would result in the tax cuts paying for themselves. However, the CRS has found that the tax cuts have not yet come anywhere close to paying for themselves.
The economy did expand by a solid 2.9 percent in 2018, following the tax cuts. However, the CRS noted that this was the projected growth rate before the cuts were put into place. The solid GDP growth was accompanied by sluggish wage growth, just 2 percent. Worse yet, the real wage rate for production and non-supervisory workers grew by just 1.2 percent.
Americans workers paid more in taxes on the whole with income tax revenues rising by $45 billion. However, this was offset by a $40 billion decline in corporate revenues, while payroll taxes dropped by 7 percent. Declining revenue in combination with rising spending has produced record deficits.
In fact, deficits have been higher than expected. Through the first fix months of the Fiscal year, the deficit climbed to nearly $700 billion. During the same period last year, the deficit hit nearly $600 billion, itself a record-shattering amount. So far, it seems, the tax cuts are far from self-sustaining.