According to the non-partisan Congressional Budget Office, the Tax Cuts and Jobs Act of 2017 was estimated to cost $1.9 trillion between 2018 and 2027. Large corporations have received massive tax cuts. Let’s be sure you understand that the $1.9 trillion is lost revenue to the operation of the federal government.
In order to balance the federal budget you would have to either reduce spending, increase taxes or increase borrowing. The current administration has increased spending and increased borrowing. Try that with your own personal budget and see what happens. You are right. Bankruptcy will be knocking on your door. Does that sound familiar? That is not a conservative Republican plan.
The result of the tax cut means that the federal deficit will and is climbing to new heights. The spin at the time was that it would create more jobs and that would result in an increase in tax collection and thus reduce the deficit. Wonder why the deficit is increasing more than it ever has? Now you have the answer.
In a recent poll by the Center for American Progress, 2,000 voting participants were asked how the 2017 tax law impacted your personal taxes over the last two years. Twenty-seven percent stated that they paid more in taxes and 46% said their taxes remained about the same. Only 17% stated that they paid less in taxes. You can be your own judge regarding your personal tax payment. Did your tax bill decrease and if so, was it quite sizable?
Rep. Phil Roe voted for the tax cut in December of 2017. He said that legislation “results in a tax cut for the vast majority of taxpayers — particularly the middle class.” In addition he said “your tax cut should be quite sizable.” Of course Rep. Roe failed to realize that the average earnings in the First Congressional District are nowhere near his own taxable income. Sizable has limited meaning when you are not a high-income taxpayer.
You now have personal data that you can review to see if you actually did pay less federal income tax. You should review your 2017 and 2018 tax return. Then in when you file your 2019 tax return do a follow up review. We now know that a lot of middle income taxpayers have paid more tax, not less because of a change in allowable deductions. It was a clever trick where you increase and you also decrease some items allowable for deduction so that you come up with an almost zero effect on deductions taken on your federal tax return.
There was a deliberate limitation of $10,000 maximum tax deduction that includes real estate tax, income tax and sales taxes. Those who live in states that have higher real estate taxes, sales tax and income taxes were hit the hardest. Even with that limitation, there are some in the First Congressional District who were also affected with the $10,000 limitation. That limitation actually increased their federal income taxes. At the time this law was passed Republicans had control of both houses of Congress.
I am sure you remember when Rep. Roe was running for his first time to represent the First Congressional District one of his talking points was that the federal deficit was way too large and that it would be harming our children and grandchildren in the coming years if we did not do something about it. That was a conservative Republican view and a major talking point during many Republican elections.
Isn’t it ironic that the largest increase ever in our federal deficit has occurred while Rep. Roe has been our Representative in Congress and he cast a vote that actually made that happen? In addition, he has voted for federal budgets that have increased spending as well as borrowing. What happened to that campaign pledge to do something about the national debt?
The CBO projected deficit for the current fiscal year (2019-2020) is expected to reach $1.038 trillion or more. This is a deficit for just one year. Why is this important? Because the money borrowed by the federal government is not only owed to the American public but to individuals in other countries as well and there are interest payments that have to be made on a regular basis. By the year 2028 the deficit per year is expected to reach more than $2 trillion.
The interest on that amount of money will require that 32 percent of all income tax revenue go to pay the interest on our national debt. Nearly one in every three dollars will be used to service our debt. This does not normally occur in an economic expansion. What happens if between now and the year 2028 we have an economic downturn? During an economic downturn the revenue collected by the federal government goes down and the debt increases.
The national debt is increasing more rapidly than ever. The total public debt now stands at more than $23 trillion. The debt per each citizen is $69,978. The debt per each taxpayer is $186,951. Please note that since the writing of this article those numbers have increased. The debt is increasing at rates not seen since the 1940s.
China holds the most Treasury securities, followed by Japan, Brazil, Switzerland and the United Kingdom. Other countries holding Treasury securities include Russia, Australia, Saudi Arabia, Canada, Mexico, Chile, Argentina, Turkey, Iraq Israel and Germany. This is not a complete list of countries holding Treasury securities. Seventy-five percent of foreign holdings of Treasury securities can be attributed to 14 countries.
When we have a large rapidly growing debt, it can depress future economic growth. In addition, it places pressure on the federal government’s ability to handle defense or any national emergency, natural disasters, recessions, and improvements to our infrastructure because more of the revenue collected has to be used to service the debt, i.e. interest payments.
We can all agree that the unfunded tax cuts and spending increases have made matters worse. The sad part of this scenario is that the debt will ultimately fall to our children and grandchildren who may face a future where their day-to-day finances are placed in jeopardy because of the need to increase taxes to pay for the ever growing debt. The clock is ticking.