New US tax cuts would worsen federal fiscal picture - CBO
Republican plans to make President Donald Trump's tax cuts permanent for individuals and many private businesses would worsen an already rising U.S. debt burden, congressional researchers said on Tuesday.
In its annual long-term budget outlook, the nonpartisan Congressional Budget Office (CBO) said the debt will equal 78 percent of U.S. gross domestic product by the end of the year and a record 152 percent by 2048, a trajectory that it said would hurt the economy, increase the likelihood of a fiscal crisis and make it harder for the government to respond.
Trump's $1.5 trillion tax cuts and a $1.3 trillion spending bill enacted by Congress in March have already helped push CBO's debt projections higher through 2041, the report said.
The new tax law permanently slashed the corporate income tax rate to 21 percent from 35 percent. But $1.1 trillion in tax cuts for individuals and businesses structured as "pass-throughs" are set to expire after 2025.
"If lawmakers changed current laws to maintain certain policies now in place, preventing a significant increase in individual income taxes in 2026, for example, the result would be even larger increases in debt," the CBO report said.
Analysts said the federal fiscal picture is rapidly deteriorating under the combined effect of higher spending for healthcare programs and Social Security, insufficient government revenue and rising debt interest payments.
"The massive deficits caused by policymakers' recent tax and budget decisions have drastically worsened the country's long-term finances," said Shai Akabas, director of economic policy at the Bipartisan Policy Center think tank.
But the specter of fiscal deterioration has had little effect on Congress, as lawmakers head toward a November midterm election showdown for control of the Senate and House of Representatives.
House Ways and Means Committee Chairman Kevin Brady said on Tuesday that his tax writing panel will outline a new tax package this summer that would make permanent tax cuts for individuals and private businesses.
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"In tax reform 2.0, permanency for those middle-class families and for those small businesses will be the centerpiece," Brady, a Texas Republican, said at a tax forum hosted by the Washington Post.
Brady expects a House vote in the autumn. But new tax legislation may not fare well in the closely divided Senate, where Republicans would need support from Democrats who uniformly opposed last year's tax overhaul.
Trump economic adviser Kevin Hassett told the same forum that tax cuts were not to blame for the rising deficit.
"The deficit is skyrocketing. But it's not a legacy of the tax law. It's a legacy of the spending deal," Hassett said, arguing that corporate tax revenue is running higher than expected.
Administration officials and Republicans in Congress contend that the tax cuts will pay for themselves by generating higher economic growth.
But the CBO said rising debt levels would hurt the economy, constrain budget policy and reduce longer term national savings and income. (Reporting by David Morgan Editing by Kevin Drawbaugh and Bill Berkrot)