In their never ending push to raise more taxes and expand government, the White House and allies groups are trying to make the case that today’s deficits and debt were caused by Republicans tax cuts, not the growth of government spending. They contend that deficits would be 90% lower if tax cuts had not been enacted and federal tax rates had just stayed at 2001 levels.This is a silly argument, especially given the enormous growth of government the last two decades. The argument makes the assumption that the government would not have spent every dollar of the higher taxes. Rather than eliminating deficits, higher tax rates over the last two decades would have given Washington trillions of dollars more and fueled even more government spending.Since 2001, government spending as a share of the economy has increased from 17.7% to 24.2%. Taxes as a share of the economy have remained roughly the same, declining slightly from 18.9% to 18.4%. Higher taxes would not have been used to offset the higher spending over the last two decades. These higher taxes would have just given Washington even more revenue to spend.Current budget estimates show that Washington will spend every last dollar they bring in and more. Federal taxes are projected to increase $60 trillion over the next ten years. Rather than reduce the deficit with the trillions coming in, federal spending is projected to increase $80 trillion.Absent the tax cuts, tax rates would have been higher across the board. Tax rates on small businesses, retirement savings, capital gains and dividends would all be higher. The tax rate on U.S. companies would be the highest in the world, greatly exceeding the tax rates of our global competitors around the world.These high tax rates would not have gone to reducing the deficits. They would have given Washington trillions of dollars to spend and to expand the size of and scope of government. An even bigger government would have meant a smaller private sector, and more government control of the economy.Over the last two decades, the U.S. economy has grown at less than 2% a year, compared to real annual growth of 3.5% from 1960 to 2000, as both spending and taxes grew. The only way to reduce deficits is to curb the growth and size of government and adopt pro-growth tax policies which stop taxes from rising and encourage more economic growth.
Repealing Republican Tax Cuts Would Not Reduce the Deficit
January 19, 2024
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