The Frontal Cortex

Do Tax Cuts Pay for Themselves?

Not if you read the fine print. According to an analysis by the Treasury Department, Bush’s tax cuts may raise total national output of goods and services by 0.7%.

But is that enough to pay for the tax cuts? Not even close. An 0.7 percent increase in economic output would lead to increased tax payments of $29 billion.

Sounds impressive, right? Wrong. Making the tax cuts permanent would reduce federal revenues in 2016 by $314 billion. That is more than 10 times what the Treasury analysis suggests tax cuts would generate in increased tax revenue. While trickle-down economics might make for good politics, it’s bad economics. Growth is great, but at what price?