Fact Check: "New tax cuts could permanently eliminate $2 trillion in revenue!"
What We Know
The claim that new tax cuts could permanently eliminate $2 trillion in revenue stems from discussions surrounding the FY2025 House budget reconciliation and proposed tax cuts by the Trump administration. According to a report from the Wharton Budget Model, the House budget reconciliation includes provisions for $4.5 trillion in net tax cuts. This could potentially lead to a significant increase in primary deficits, estimated at $6 trillion over a 10-year period if these tax cuts were enacted permanently. However, due to budget reconciliation rules, most tax cuts would need to expire by December 31, 2033, to avoid increasing primary deficits beyond the allowed limits.
The Brookings Institution also notes that the 2017 Tax Cuts and Jobs Act (TCJA) is expected to add nearly $2 trillion to the deficit by 2028, with many household tax reforms set to expire in 2025. This indicates that while tax cuts can lead to substantial revenue loss, the actual permanence of these cuts is contingent on legislative actions and budgetary rules.
Analysis
The assertion that new tax cuts could eliminate $2 trillion in revenue is partially substantiated by the data presented in the sources. The Wharton Budget Model outlines that the proposed tax cuts could indeed lead to a permanent increase in deficits, but it also emphasizes that these cuts would likely not be permanent due to the need for them to sunset in 2033 under current budget reconciliation rules. This means that while the potential for a $2 trillion revenue loss exists, it is not guaranteed to be permanent.
Moreover, the Brookings Institution highlights that the TCJA's effects are projected to add significantly to the deficit, but it also indicates that many of the tax cuts will expire, which complicates the claim of a permanent revenue loss. The CBO further supports this by projecting that the tax cuts could lead to a $2.4 trillion increase in the deficit, but again, this is not a straightforward elimination of revenue as it depends on the continuation of the tax cuts.
The reliability of these sources is generally high, as they come from reputable institutions that analyze fiscal policy. However, it's important to note that projections about tax cuts and their effects on revenue and deficits can vary widely based on assumptions about economic growth and taxpayer behavior.
Conclusion
The claim that new tax cuts could permanently eliminate $2 trillion in revenue is Partially True. While there is evidence suggesting that tax cuts could lead to significant revenue losses and increased deficits, the requirement for these cuts to sunset by 2033 under budget reconciliation rules complicates the assertion of permanence. Thus, while the potential exists for substantial revenue loss, it is not guaranteed to be permanent without further legislative action.
