Congressional Republicans are worried that their huge 2017 tax cut isnâ€™t resonating with voters. So theyâ€™re doubling down by pushing for another big tax cut in September. Itâ€™s much more a political gambit than an economic one.
With the assent of the White House, Republican leaders will propose a permanent extension of the tax cuts for individuals and small businesses, which had been slated to expire after 2025. This cutoff was done purposely last year to hold down the projected cost of the legislation - estimated at $1.9 trillion or more in reduced revenues over a decade.
The tax cuts for corporations, and some affecting wealthier individuals, were made permanent from the start because GOP leaders knew it would be harder politically to come back and extend them.
The new legislation, still being assembled, will be packaged as an effort to help the middle class and to create new retirement incentives.
Thatâ€™s a ruse.
Any new retirement saving accounts would be in the form of tax breaks that primarily would benefit upper-income individuals. Moreover, numerous studies have suggested that such tax-based incentives mainly subsidize savings that would have occurred anyway.
The individual cuts enacted last year were skewed heavily to the wealthy, so a permanent extension would help the same group.
Making the individual cuts permanent would reduce government revenue by about $250 billion in 2027 alone, the Congressional Budget Office has estimated. In the ensuing decade, it would add trillions more to federal deficits. The national debt, which candidate Donald Trump vowed to eliminate, is expected to soar to $33 trillion by 2027 from around $21 trillion today.
Republicans expected the tax cut to be a major political asset for them this year, offsetting the advantage Democrats enjoy as advocates of comprehensive health-care legislation.
But that has not been the case, and itâ€™s Democrats who have turned the tax cut to their advantage by criticizing it for favoring corporations and the wealthy.