The battle over economic legacies intensified this week as Republican lawmakers launched a coordinated defense of the 2017 Tax Cuts and Jobs Act. This signature Trump-era legislation faces renewed scrutiny amid election-year debates about fiscal responsibility and economic growth.
“What we accomplished in 2017 was nothing short of transformative for American businesses and families,” Rep. Jason Smith (R-MO), chairman of the House Ways and Means Committee, told me during a Capitol Hill interview yesterday. “The narrative that these tax cuts exploded the deficit ignores the economic growth they generated before the pandemic.”
The timing of this Republican messaging push coincides with the Treasury Department’s latest quarterly report showing federal debt surpassing $34 trillion. According to the Congressional Budget Office, the annual deficit is projected to average $2 trillion over the next decade, raising questions about the long-term fiscal impact of the 2017 tax legislation.
An analysis from the Tax Foundation estimates the tax cuts reduced federal revenue by approximately $1.5 trillion over ten years. However, Republicans argue these projections fail to account for economic growth stimulated by the cuts. “We saw unemployment reach historic lows and wages rise across all income levels before COVID disrupted everything,” Smith added.
Democrats maintain a different perspective. “The 2017 tax cuts primarily benefited corporations and the wealthy while adding significantly to our national debt,” Rep. Richard Neal (D-MA), ranking member on Ways and Means, said in a statement released Tuesday. “Now Republicans want to make these temporary provisions permanent without any plan to offset the costs.”
The debate centers on several provisions set to expire after 2025, including individual tax rate reductions and the doubled standard deduction. Making these permanent would cost approximately $3.7 trillion over the next decade, according to the Committee for a Responsible Federal Budget.
Mark Zandi, chief economist at Moody’s Analytics, offered a nuanced assessment. “The tax cuts did provide some economic stimulus in the short term, but the growth effects weren’t sufficient to make them self-financing as promised,” he explained during our phone conversation. “The deficit impact was substantial, though not as dramatic as some critics suggested.”
The economic landscape has changed dramatically since 2017. The pandemic triggered unprecedented government spending, with COVID relief packages dwarfing the fiscal impact of the tax cuts. Inflation reached four-decade highs before moderating, and interest rates rose substantially, increasing the cost of servicing federal debt.
“Context matters enormously in this debate,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “The tax cuts came at a time when the economy was already growing steadily. Now, with higher interest rates and debt levels, the fiscal consequences of extending these provisions would be more severe.”
Republican lawmakers point to record tax revenue in recent years as evidence the cuts worked as intended. Treasury data shows federal receipts reached $4.9 trillion in fiscal year 2023, though analysts note this partly reflects inflation-driven nominal growth rather than tax policy effects.
The corporate tax rate reduction from 35% to 21% remains particularly contentious. A Treasury Department study found corporate tax receipts fell by one-third in the first year after the cuts. However, business investment increased by 9.4% in 2018 before slowing significantly in 2019 even before the pandemic.
“American companies became more competitive globally, bringing jobs and capital back to the United States,” said Neil Bradley, executive vice president at the U.S. Chamber of Commerce. “Raising the corporate rate now would put us at a disadvantage precisely when we’re trying to rebuild domestic manufacturing.”
On Main Street, perceptions remain mixed. Mark Sullivan, who owns a construction company in Pennsylvania, told me the tax cuts initially boosted his business. “We saw immediate benefits and hired three new employees in 2018,” he said. “But those gains were wiped out by COVID, and now inflation and interest rates are bigger concerns than tax rates.”
The debate occurs against a backdrop of growing public concern about federal finances. A recent Gallup poll found 76% of Americans worry about federal spending and budget deficits “a great deal” or “a fair amount,” up from 68% in 2020.
With election season intensifying, the economic arguments will likely grow more heated. Republican presidential candidates are promising to extend or expand the 2017 tax cuts, while Democrats propose targeted tax increases on corporations and high-income earners to fund social programs and deficit reduction.
As Washington navigates these complex fiscal issues, the American public deserves a fact-based discussion that acknowledges both economic growth objectives and fiscal sustainability concerns. The true impact of the 2017 tax legislation will likely remain disputed, but the decisions made about its expiring provisions will shape federal finances for years to come.
For now, as tax policy experts at the Brookings Institution note, the most prudent approach may involve selective extension of middle-class benefits while allowing some higher-income provisions to expire – a compromise neither party seems eager to embrace in today’s polarized environment.
