Tax Bill Is a Missed Opportunity That Makes Fixing Our Fiscal Challenges Much More Difficult
For Immediate Release
Congress voted on the Tax Cuts and Jobs Act Tuesday and early Wednesday. The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
This is the wrong legislation at the wrong time. This country desperately needed tax reform – we needed to get rid of antiquated and distorting tax breaks in order to finance a more efficient and pro-growth tax code. Instead, Congress is passing what could ultimately be a $2 trillion tax cut with far too few reforms – the bill might actually increase the number of tax breaks.
Before the country enacted tax cuts in 2001, debt was at modest levels and we were forecasting nearly $6 trillion in budget surpluses over the following decade. Today, debt is at post-WWII record levels, and we’re on course to add $10 trillion to the debt over the next decade even before these tax cuts. Unquestionably, this legislation would make a bad fiscal situation worse. And it opens the door to further debt-financed legislation this year and in the future.
In combination with other year-end legislation, this tax bill could cause the return of trillion-dollar deficits as soon as next fiscal year; and it could lead debt to exceed the size of the economy within a decade. Meanwhile, it will leave us with little fiscal space to address future emergencies and priorities.
No one predicted that after the 2001 tax cuts we would have experienced the largest terrorist attack in our nation’s history, fought two wars, been hit by several major hurricanes, and ultimately fallen into a deep recession and financial crisis. Even if no similar events occur, our debt is rising unsustainably. Certainly, this tax cut makes us less equipped to deal with the next disaster, war, or recession.
I remain hopeful that this tax bill can help to improve economic growth. But likely the largest effects will be from a one-time economic sugar high; and when we come down from it, America will enter uncharted fiscal waters.
Those counting on massive, sustained economic growth to ensure the bill doesn’t add to the debt will be sorely disappointed. Not one credible analysis of the legislation shows the tax plan will pay for itself, or anywhere close to it. Most believe the bill will increase the growth rate by an average of 0.1 percentage points per year or less over the next decade, and that growth will fade as high levels of debt begin to hamper economic performance.
When Congress began its work on tax reform, they called for a plan that was fully paid for. We were very supportive of that approach. Unfortunately, this final legislation represents a lost opportunity for once-in-a-generation reform that could have grown our economy, modernized our tax code, and actually improved America’s dismal fiscal decline. Furthermore, the passing of a large deficit-financed tax plan will make it harder – both fiscally and politically – to turn our attention to taking the necessary measures to address the nation’s unsustainable fiscal path.
With massive debt, exploding deficits, and entitlement programs racing toward insolvency, our current path is unsustainable. Policymakers need to act soon to begin righting the ship, and sadly this tax bill steers us further in the wrong direction.
We need to make this right – not just for our government’s bottom line; not just for our economy’s growth potential; but for future generations of Americans to whom the cost will be passed.
For more information contact Patrick Newton, press secretary, at firstname.lastname@example.org.