Study says Trump’s 2017 tax law increased the federal deficit
Trump promised to boost the economy, but his tax cuts added $100 billion annually to the deficit, researchers say.
President Donald Trump and his allies said the 2017 Tax Cuts and Jobs Act would significantly boost the nation’s economy and reduce the national debt. A new analysis of the law’s corporate tax cut provisions finds that it did neither of those things.
A March 2024 working paper by researchers at Harvard University, Princeton University, the U.S. Treasury Department, and the University of Chicago, published by the National Bureau of Economic Research, estimates both how much corporate tax rate reductions included in the law spurred economic growth and how much they affected revenue.
Trump ran in 2016 on a promise of a massive $4.4 trillion tax cut, which he claimed would somehow only cost $2.6 trillion and would slash tax bills for middle-class families by almost a third.
Instead, Trump and Republican majorities in the House of Representatives and the Senate enacted his signature $2.3 trillion 2017 tax package, which mostly reduced tax rates for corporations and wealthy individuals while increasing them for millions of working families.
Treasury Secretary Steven Mnuchin claimed repeatedly that the plan would more than pay for itself by stimulating enough new economic growth to make up for the rate reductions.
The report’s authors estimate that the tax cuts actually added more than $100 billion annually to the budget deficit and that only a tiny fraction of its costs were offset.
Trump said in a July 2018 radio interview with host Sean Hannity that the tax law and his other policies would spur 8%-9% GDP growth. “We have $21 trillion in debt. When this really kicks in, we’ll start paying off that debt like it’s water,” he predicted. “That will go down very quickly because the numbers, with growth and the kind of growth that we’ve produced, the 4.1 [percentage growth in GDP] can actually go higher.” The new report estimates that the boosted investment from the corporate tax cuts helped grow the economy only by about 0.1% annually.
The national gross domestic product never reached 4% during Trump’s presidency until the third quarter of 2020, when it partially rebounded from a contraction of over 31% caused by the pandemic.
The Trump administration had predicted that the law’s corporate cuts would raise the average salary for workers by between $4,000 and $9,000 annually. The new report estimates that actual long-run wage gains from the law were about $750 per year.
Wisconsin Reps. Mike Gallagher and Glenn Grothman voted for the 2017 tax law. Grothman and Republican Reps. Scott Fitzgerald and Bryan Steil have backed legislation to make the individual tax provisions permanent before they expire in 2025.
