A recent, little-noticed update on federal revenue projections from the nonpartisan Congressional Budget Office is yet another reason to reject the massive tax increases proposed by the Biden administration.
CBO estimated that going forward federal taxes will bring in significantly more money than previously estimated. In 2022, CBO now projects a 10% increase in revenues. This is particularly good news because tax rates haven’t gone up, meaning that this increased revenue is another sign that our economy is getting back to its pre-pandemic strength. It also reminds us that the 2017 tax reforms and tax cuts that helped create the historically strong pre-pandemic economy are working as intended and must remain in place as we move into the future.
In the two years before COVID-19 hit, the pro-growth policies former President Donald Trump and the Republican Congress put in place through the 2017 Tax Cuts and Jobs Act helped fuel record growth in jobs and wages. The month before the pandemic was the 19th straight month of wage growth above 3%, with most of the benefit going to middle and low-income workers. This is consistent with a CBO study that found 70% of corporate tax cuts end up going into workers’ wages and benefits.
Before the pandemic, we also tied the 50-year low in unemployment at 3.5% and had historic lows in unemployment for blacks and Hispanics. We also reached the lowest poverty rate, 10.5%, in the more than 60 years we have tracked the statistic. The 2017 tax cuts led to both a stronger and more equitable economy.
The 2017 reforms Trump signed also helped the U.S. compete globally and stopped the corporate inversions that were a recurring problem during the Obama administration and the first year of the Trump administration, causing American companies to become foreign companies and move jobs and investment overseas to get out from under our uncompetitive tax laws. And it ended the lockout effect, resulting in $1.6 trillion in overseas earnings coming back home to invest and create jobs here.
As a result of those changes, the largest U.S. companies increased domestic research and development spending by 25%, to $707 billion, and capital expenditures by 20%, to $1.44 trillion. The tax cuts and tax reforms worked as intended, and based on this new CBO study, continue to work as we come out of the pandemic.
Despite the challenges of the past year, the fundamentals of our economy remained strong. In fact, CBO projected in January that without additional government help — for example, the Biden administration’s $1.9 trillion spending package that passed Congress in March with no Republican support — the economy would fully recover by midyear, which it by and large has done with regard to gross domestic product, even as much of that spending has not yet gone out.
A Wall Street Journal consensus survey of economists at the beginning of the year similarly projected strong economic growth. Payroll tax revenue has risen by 4% as well, suggesting that workers are taking home bigger paychecks than before. Although unemployment levels have not completely returned to pre-pandemic levels, we know that many of the policies that Democrats have supported (to keep schools closed and provide millions of Americans with generous unemployment insurance supplements that pay them more not to work than they would at their jobs) have contributed to this worker shortage.
The opportunity economy we had pre-COVID worked for working families across America. We cannot allow the Biden administration and some Democrats in Congress to reverse course by massively increasing taxes. President Joe Biden’s budget proposal would allow nearly all of the 2017 tax cuts to expire, including raising business taxes, which would stifle economic growth and hurt working families.
Raising taxes on hard-working American families and businesses is the wrong approach to continued economic growth. Instead, we should build on the positive progress over the two years pre-pandemic by making a targeted investment in helping our economy grow without raising taxes. Right now, I am working with a bipartisan group of colleagues in Congress to do just that through a historic investment to upgrade our core infrastructure needs: the roads, bridges, railroads, ports, broadband, and more that help drive our economy every day. According to the University of Pennsylvania Wharton School of Business, our proposal will increase GDP, raise wages for workers, and lower our national debt in the long term, all without raising any individual or corporate income taxes on families and businesses.
In 2017, we helped usher in an economy powered by workers and businesses across the country, not by liberal spending priorities in Washington, and the results were truly historic. Moving ahead, let’s stay the course instead of hiking taxes and putting a damper on American prosperity and opportunity.
Rob Portman is the junior U.S. senator for Ohio.
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