No, tax cuts are not increasing the deficit
The pro-tax crowd continues to blame tax cuts for our increased debt. That typically has not been the case in the past, and it isn't the case today.
When the economy grows individuals can pay less, but since more contribute to the tax rolls, revenue increases. The US does not tax too little. It spends way too much.he Treasury Department reported a $208 billion deficit for the month of May — which is $61 billion higher than May 2018. To put that in perspective, the deficit for the entire year of 2007 was $161 billion.
In the first eight months of the current fiscal year, red ink has already reached $738 billion. Even adjusting for inflation, the total annual federal deficit has exceeded that only six times in the nation’s history (five of them under President Obama).
Not surprisingly, the Republican tax cuts are taking the blame for this year’s extraordinary deficits.
But wait a minute. Overall federal revenues were up in May by $15 billion — that’s a 7% gain over May 2018 — the latest monthly Treasury report shows.
So where did May’s big deficit increase come from? Well, spending in that month was $440 billion. That’s $76 billion — or 21% — more than last year.
Some of that increase in spending in May was the result of a quirk of the calendar. But the same trend holds true for the fiscal year.
For the first eight months of the fiscal year (which started last October), revenues climbed more than $50 billion, compared with the first eight months of the previous fiscal year.
The press has focused on the fact that Trump’s tariffs boosted customs duties by $20 billion so far this year.
But that conveniently overlooks the fact that individual income tax revenues are up by $17 billion, and payroll taxes are up more than $30 billion. Both are signs of a healthy job market that pushed the unemployment rate to 50-year lows and is boosting wages as the labor market tightens.
Over these same eight months, however, spending exploded by almost $257 billion — an eye-popping 10% increase.