Weekend Reading: Tax Cuts Saved The Economy?

IBD recently penned an article touting the success of the recent tax cuts from the Trump administration.

“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.”

Hold on a second.

A $14 billion increase on $1.68 Trillion in receipts is a very paltry 0.8% increase. This is the 8th LOWEST rate of increase in the history of data and is more representative of population growth rather than the success of tax cuts bringing in more revenue.

In fact, when looking at Federal Receipts on an annualized basis, growth in receipts as of the end of Q2 has fallen by more than 4% annually. Importantly, throughout history, negative growth rates in Federal receipts have been associated with recessionary periods in the economy rather than expansions.

But IBD in their effort to support the Trump tax cuts continues:

“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.”

Well first, as we have shown previously, the tax cuts DID INDEED blow a hole in the deficit. Currently, the deficit is rapidly approaching $1 Trillion and will exceed that level in 2019.

To IBD’s point, the economy has grown faster than expected and jobs have increased (but not more than expected.)

“Yes, the economy was booming in fiscal 2018. But it probably wouldn’t have been booming without the tax cuts.“

Actually, no.

It wasn’t Trump’s tax cuts that led to this growth but, as we discussed recently with Danielle Dimartino-Booth, it came from a “sugar-high” created by 3-massive Hurricanes in 2017 which have required billions in monetary stimulus, created jobs in manufacturing and construction, and led to an economic lift. We saw the same following the Hurricanes in 2012 as well.