The fiscal malpractice long demonstrated by both parties in Washington, D.C., is driven home by a recent headline.
“Trump tax cut cost: $4.6T,” reads the large type on the front page of Friday’s edition of The Columbian, referring to a decade of federal spending. That’s $4.6T, as in trillion, and it represents what the nonpartisan Congressional Budget Office says will be required to extend the Trump tax cuts that were passed in 2017.
The cost of extending the tax cuts is of particular interest to individual households. Cuts to business taxes approved in 2017 have no expiration date; but individual tax cuts expire at the end of 2025, ensuring that tax policy will be at the forefront of congressional debates next year.
And it all was predictable. In 2018, then-Congresswoman Jaime Herrera Beutler, a Republican, told The Columbian’s Editorial Board: “I think that’s a failing of the bill. I cajoled as many of the committee members as I could on that issue. The answer I got is politically, there’s no way they’d ever let it expire. … If these are good, which we believe they are, why not make them permanent?”
Why not, indeed? But Congress has taken no action in the past six years to make the individual tax cuts “permanent.” As it stands now, your personal taxes will increase at the end of next year while business tax reductions will continue. Those reductions cut the standard business tax from 35 percent to 21 percent.
Meanwhile, the tax cuts have contributed to a federal debt that is nearing $35 trillion. The debt ballooned during Trump’s presidency despite a generally strong economy; it exploded at the beginning of the COVID-19 pandemic, when business shutdowns hampered the economy and slowed tax revenue; it has continued to grow under President Joe Biden following a series of expensive spending initiatives.
And as anybody who has paid a mortgage or borrowed money for a car or spent a bit too much on their credit cards understands, debt payments can add up to more than what was borrowed. In 2023, the federal government made $659 billion in interest payments on the federal debt. That is nearly $2,000 for every person in the United States.
Deficit spending has not been limited to either party, but the Trump tax cuts were particularly irresponsible. Contrary to common Republican rhetoric, tax cuts do not pay for themselves through revenue growth, and the Trump cuts particularly benefited high earners.
As Nobel Prize-winning economist Paul Krugman, a columnist for the New York Times, has explained: “You go out for dinner with a wealthy acquaintance. ‘I’ll take care of everything,’ he says, and orders you a hamburger. Then he orders himself an expensive steak and a bottle of wine, which he doesn’t share. And when the waiter comes with the check, he points at you and says, ‘Charge it to his credit card.’ Now you understand the essence of the Trump tax cut.”
Projections for future federal budgets are based on the expiration of the individual tax cuts. If current individual tax rates are extended, it will add $3.3 trillion to the deficit –—or require additional revenue from other sources, according to the CBO.
Biden has proposed income tax increases for those making more than $400,000; Trump, who has filed for bankruptcy six times as a private businessman, wants additional tax cuts but has no plan to pay for them.
Regardless of who wins the presidential election in November, the United States is in need of sound fiscal management.
