(Picture courtesy of Frankworks of President Trump’s Nashville visit)
By Investors Business Daily,
Taxes: Critics of the Trump tax cuts said they would blow a hole in the deficit. Yet individual income taxes climbed 6% in the just-ended fiscal year 2018, as the economy grew faster and created more jobs than expected.
The Treasury Department reported this week that individual income tax collections for FY 2018 totaled $1.7 trillion. That’s up $14 billion from fiscal 2017, and an all-time high. And that’s despite the fact that individual income tax rates got a significant cut this year as part of President Donald Trump’s tax reform plan.
Income Taxes After Trump Tax Cuts
True, the first three months of the fiscal year were before the tax cuts kicked in. But if you limit the accounting to this calendar year, individual income tax revenues are up by 5% through September.
Other major sources of revenue climbed as well, as the overall economy revived. FICA tax collections rose by more than 3%. Excise taxes jumped 13%.
The only category that was down? Corporate income taxes, which dropped by 31%.
Overall, federal revenues came in slightly higher in FY 2018 — up 0.5%.
Spending, on the other hand, was $127 billion higher in fiscal 2018. As a result, deficits for 2018 climbed $113 billion.
Let’s compare these results with Obama’s last full fiscal year in office, 2016.
Individual income tax revenues went up by a mere 0.3%, Treasury data show. Fiscal 2016 also saw a 13% drop in corporate income taxes. FICA tax collections climbed by less than 1%. Excise tax collections dropped almost 3%.
Overall revenues increased by 0.5% — about the same as this year. The deficit? It climbed by $148 billion.
So, in other words, the government did better on revenues and deficits in the year after Trump’s tax cuts went into effect than it did in Obama’s last year in office.
Trump Tax Cuts To Blame For Deficit?
To this, critics say, yes, but revenues would have climbed faster had it not been for the tax cuts, because the economy was booming in 2018, unlike in 2016.
Yes, the economy was booming in fiscal 2018. But it probably wouldn’t have been booming without the tax cuts. Had Trump not succeeded in getting his pro-growth tax cuts across the finish line, it’s possible we’d have seen a year like Obama’s last one. A sluggish economy, barely increasing federal revenues, and a large increase in deficits.
Does that mean Trump’s tax cuts are fully “paying for themselves”? We wouldn’t make that argument. But the faster economic growth is clearly offsetting at least some of their costs — which is precisely what backers said would happen.
What is unmistakable from the data, however, is that the Trump tax cuts are not entirely, or even mostly, responsible for the increase in the deficit. Blame for that rests squarely with spendthrifts in Congress — on both sides of the aisle — who refuse to bring federal spending under control.
So, the question is: Would it have been better to have kept taxes high, and sacrificed economic, job and wage gains we’ve been enjoying, so that the government could have collected a little bit more in taxes?