Federal Revenue Did Well Under the Trump Tax Cut

Democrats are touting a GAO report as evidence that corporations don’t pay up. They’re wrong.

The original Ryan/Brady tax reform was largely the brainchild of Goodman Institute economists Alan Auerbach (Berkeley) and Laurence Kotlikoff (Boston University). The 2017 tax cut bill that finally passed was probably half as good in terms of economic impact. But it was still worth doing.

Kotlikoff and Auerbach predicted the measure would lead to an inflow of capital from abroad – leading to more investment, more jobs, higher household income and no increase in federal debt relative to GDP. They also predicted that the new tax regime would be just as progressive as it previously was – if not more so.

At the time, the CBO predicted that the measure would reduce the government’s corporate tax revenue. But the latest news from the CBO is that corporate tax payments for 2022 ($425 billion) are higher than what the CBO predicted they would be with no tax bill at all ($389 billion)!

Individual tax payments are also up. As Sen Mike Crapo reports in the Wall Street Journal, despite reduced tax rates for individuals and corporations, tax revenues reached an all-time high of $4.9 trillion last year.

Incentives matter. Supply-side responses are real.

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