CfG President McIntosh on Trump 2025 Tax Cuts
Washington, D.C. – Club for Growth President David McIntosh issued the following statement on extending and expanding the Trump Tax Cuts:
“Republicans in Congress and President Trump face an enormous, existential challenge in their efforts to boost the economy and deliver on their promises from the campaign. Key provisions of the 2017 Trump Tax Cuts will expire this year. If that happens the $4.6 trillion tax increase will hit working families and likely plunge the economy into a massive recession.
Congress has the tool to extend those tax cuts and make additional pro-growth changes that will super-charge the economy through the reconciliation bill authorized by the next budget resolution. But Congress is stuck in an accounting debate that means nothing to the American people who voted to end the malaise caused by Bidenflation. The results from the 2017 tax cuts are clear – more jobs, higher take-home pay and economic growth of 3% immediately following enactment. The permanent effects of these pro-growth policies include a 7.4% increase in capital investment and a 0.9% increase in wages. Put simply, we know that the 2017 tax cuts provided real benefits for real people.
We also know that Congressional Budget Office (CBO)’s revenue estimates consistently miss the mark. In fact, revenues for FY 2025 will be $443 billion higher than CBO originally projected in 2017. Additionally, the CBO has consistently underestimated the cost (in both direct spending and tax expenditures) of the subsidies for inefficient and unreliable energy sources provided in the Inflation Reduction Act. Using the CBO’s own figures, taxpayers are now on the hook for $825 billion – more than double the original $400 billion estimate. Other estimates for the Biden green energy subsidies peg the cost as high as $1.2 trillion.
The lesson for members is simple – do not take CBO assumptions as gospel and do not assume that CBOs preferred ‘current-law’ baseline, which assumes an expiration of the tax cuts, is sacrosanct. It defies common sense to say that Americans are receiving a ‘tax cut’ simply because the law assumes their current tax rates should go up. It would certainly be a surprise to a middle-class family that paying the same amount in taxes as the previous year counts as a ‘tax cut.’
Fortunately, there is a precedent that will allow Congress to extend the current tax rates and pass even more pro-growth tax cuts. In 2013, President Obama and a divided Congress faced a massive tax increase with the expiration of the Bush 2001 & 2003 tax cuts. To prevent this, OMB and Congress used a more realistic budget accounting approach. Since the lower tax rates (for workers making less than $400,000 in this case) were part of the ‘current policy baseline,’ Congress and President Obama didn’t have to ‘pay for’ them with other tax increases. Extending the current tax rates for those making less than $400,000 was – correctly – NOT deemed to be a tax cut and thus revenue neutral. As the Obama Administration stated, ‘The relevant point of comparison isn’t current law, it is ‘current policy.’’
Republicans should embrace this approach and use a current policy baseline for the extension of the 2017 Trump Tax Cuts. Members who are rightly concerned about unsustainable deficits should work to repeal the $1.2 trillion in subsidies in the so-called Inflation Reduction Act and return federal spending back to pre-COVID levels. This will ensure that Congress can deliver on President Trump’s campaign promises, such as No Tax on Tips, and deliver further pro-growth reforms, such as better expensing for structures through neutral cost recovery – which will bring more manufacturing jobs back to America.
Republicans have a path for success in passing an even bigger tax cut bill. The budget committees in the House and Senate should embrace a current policy baseline. When they do, Congress will show they can get things done that truly benefit all Americans. The cost of failure is far more dire than the Washington math standing in the way of getting a bill through the House and Senate.”
— David McIntosh, President, Club for Growth