A recent report by the Congressional Budget Office confirms a Washington fact of life—-higher taxes do not reduce budget deficits. They just fuel more government spending and bigger budget deficits. The CBO report, its annual Budget and Economic Outlook 2024 to 2034, provides the numbers to prove the point.The report presents CBO’s outlook for the budget and the economy over the next ten years, providing baseline projections under current law of revenues, outlays, deficits, and debt. In the report, CBO assumes that the temporary provisions of the 2017 tax cuts will expire at the end of 2025. That means CBO assumes a $3.5 trillion tax increase will go into effect, thelargest tax increase in U.S. history.This should make the supporters of tax increases and the deficit hawks happy. They believe we need to raise taxes to reduce the deficits. But CBO projections show that despite the massive tax increases, deficits and debt continue to rise.Even with the 2017 tax cuts, total taxes have increased from $3.3 trillion in 2017 to $4.9 trillion in 2024, a 33% increase. If the tax cuts are allowed to expire, total taxes will increase to $7.4 trillion by 2034, a 51% increase. Total federal taxes will increase by $63 trillion over the next ten years, rising above the 50-year average level as a percent of GDP. But the deficits increase even more, because, as CBO notes, “outlays rise faster than revenues.”Federal spending will increase by $83 trillion over the next ten years, resulting in a cumulative deficit of $20 trillion. Spending will exceed the 50-year average level of 21% of GDP each and every year from 2024 to 2034.Since 2017, annual spending has increased from $3.9 trillion to $6.5 trillion in 2024, a 62% increase. Under current law, spending will continue to soar, to $10 trillion in 2034, or 24.1% of GDP, the highest level of spending since World War II, excluding the pandemic.The CBO numbers show that as federal taxes go up federal spending goes up more. Despite the biggest tax increase ever, deficits and debt explode.Annual budget deficits grow from $1.6 trillion in 2024 to $2.6 trillion in 2034, increasing to 6.2% of GDP, nearly double the 50-year average. The national debt is projected to increase to 116% of GDP by 2034, “an amount greater than at any point in the nation’s history,” according to CBO.The numbers are clear. Raising taxes will not reduce deficits. Higher taxes will just mean more spending and more deficits and debt. The only way to restore fiscal balance is to curb the growth of spending and taxes, enact pro-growth tax policies, and get the economy growing again.
Facts Are Stubborn: Tax Hikes Don't Shrink Debt
February 24, 2024
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