Most Economists Agree that Tax Cuts Will Widen U.S. Budget Deficit
While the Donald Trump administration asserts that its proposed tax plan will boost economic growth in the United States, leading economists in the country beg to differ.
According to a recent survey by Bloomberg L.P., a majority of economists believe that Trump’s tax reforms will widen America’s existing budget gap.
Out of 26 economists polled in the survey, 21 said the tax plan being proposed by the Republican Party will significantly increase the country’s budget deficit in the next 10 years.
The economists’ stance contrasts with that of the Republicans, who claim that the plan will boost economic activity in the country and increase the government’s revenue, thus narrowing the budget deficit.
Trump and his aides have been very critical of former President Barack Obama, saying the previous administration let the debt burden inflate under its watch.
Treasury Secretary Steve Mnuchin said that Trump’s tax-cut plan would cut the budget deficit by $1.0 trillion over the next 10 years, but he remained vague on details as to how the administration would make up for the loss of tax revenue.
The surveyed economists, however, predict that budget shortfall could contribute to the already expected $10.0-trillion-plus rise in federal debt over the coming decade.
Trump’s proposed tax reforms include tax cuts for both corporations and individual Americans. The proposal includes cutting the corporate tax rate from 35% to 20% and providing big businesses with additional tax breaks on their capital investments.
Under Trump’s plan, rich individuals would also receive a tax break; the top tax bracket would decrease to 35% from 39.6%. Overall, the number of tax brackets would be cut from seven to just three.
Most of the economists who were surveyed agree that the tax breaks for companies would boost business activity in the country. However, the lack of details on how the country would make up for the loss of tax revenue explains why critics believe that the tax plan may worsen the existing budget deficit.
“Most Economists Agree: Trump Tax Plan Will Widen Budget Deficit,” Newsmax Finance, September 28, 2017.