How would you describe a year in which the amount of money that corporations paid in taxes shot up by 12%? Believe it or not, Democrats are calling it a giveaway to corporate fat cats. For everyone else, it’s a sign that the Trump tax cuts are working as promised.
In fiscal year 2019, which ended in September, corporate income taxes raised $230 billion, according to the Congressional Budget Office. That’s $25 billion more than the year before and amounts to an increase of 12.4% – or roughly three times the growth rate of the overall economy.
Every single Democrat running for president has railed against the Tax Cut and Jobs Act of 2017, calling it a massive giveaway to corporations. Among other things, that law cut the corporate income tax rate from 35% – which was higher than any other industrialized nation in the world – to a more competitive 21%.
Every one of these candidates wants the corporate tax cuts “rolled back,” either partially or entirely. Sen. Elizabeth Warren wants to go so far as to impose what amounts to a graduated income tax rate on corporations. They would have to pay an additional 7% tax on profits above $100 million – which she says will generate $1 trillion over a decade.
What the Democrats aren’t telling anyone is that, at $230 billion, corporate income tax revenues are higher than even the Trump administration had expected at the start of the year, and they are higher still than the Congressional Budget Office projected when Trump signed the tax cuts into law.
Then, the CBO said corporate revenues would come in at $409 billion in the first two years of the corporate tax cuts. Actual revenues were $435 billion – almost 7% higher.
Individual income tax revenues were up 2% in 2019, and payroll tax revenue was up by 6.2%, CBO data show.
Overall federal revenues were up 4% in 2019. And they are up compared with 2017, the year before the tax cuts went into effect.
Ok, fine, but surely revenues would have been much higher without the tax cuts, right?
Well, let’s compare the revenue gains in 2019 with the changes in fiscal 2016, Obama’s last year in office.
That year, corporate tax revenues fell by almost 13%. Individual income taxes were virtually flat – up by 0.4%. Payroll taxes grew less than 5%.
Overall revenues that year were up less than 1%.
How about fiscal 2017, which ended in Trump’s first year, but before any of the tax changes went into effect?
That year, overall revenues eked out a 1.4% gain. Corporate income taxes dropped again, by 1%. Individual income and payroll taxes went up, but by less than in 2019.
So, the bottom line is revenues are increasing at a faster clip now than they were in the two years prior to the tax cuts, when the economy was slogging along.
It stands to reason that by accelerating the economy, the tax cuts clearly partially paid for themselves, just as Republicans promised.
But what about the deficit, which climbed sharply last year and the year before?
As we’ve pointed out repeatedly in this space, the deficit growth is not the result of the tax cuts, since revenues continued to climb. It is entirely due to profligate spending by both Republicans and Democrats.
Fix politicians’ spending addiction, and we can have our tax cuts and our deficit reduction too.
— Written by John Merline
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Two more measures of how the tax cuts are working:
1. In January 2017 the CBO forecast the fiscal year 2019 deficit would be $601 billion. With those tax cuts, the CBO reports it came in at $984 billion, a $383 billion (63%) increase.
2. Job growth – In the 32 months since President Trump took office the BLS reports the US added 6,027,000 jobs. In the prior 32 months the US only added 7,112,000 jobs – or over one million jobs more without those deficit increasing tax cuts.