Jim Tankersley emphasized how recent tax reform will not pay for itself in his New York Times article, "No, Trump’s Tax Cut Isn’t Paying for Itself (at Least Not Yet)." Even though federal revenues increased marginally in 2018, it will not be enough to cover the tax cut. On October 15th, the Treasury Department announced that despite economic growth and low unemployment, the federal budget deficit grew by 17 percent.
Tankersley highlights how Penn Wharton Budget Model predicted this effect back when the tax law was passed. In PWBM’s report from December, 2017, we showed that by 2027, even after accounting for economic growth spurred by the TCJA, the overall impact would still result in an increase in debt between $1.9 and $2.2 trillion. By 2040 we show that the deficit would increase between $2.2 and $3.5 trillion. Figure 1 below depicts how the TCJA will impact federal revenues and debt over the next few decades. In fact, as of June 2018 tax receipts met with PWBM projections.
