US economy

There’s No Such Thing as a Free Tax Cut


A study by the International Monetary Fund, by contrast, found that the supply-side effects were even smaller than the total increase in investment. The study concluded that businesses responded to increased demand more than they did to the lower tax rates.

The distribution of the tax cuts also has served to exacerbate economic inequality.

Mr. Trump and his advisers, sensitive to the optics of openly favoring the wealthy, have repeatedly promised that they are about to unveil a tax cut aimed at the middle class. They started saying this before the midterm elections, and they have been saying it again this week. Mr. Trump, also in Switzerland this week, went so far as to promise a plan in the next 90 days. He is not in the habit of keeping such promises, but in this case, that is probably for the best.

The economy doesn’t need another round of Keynesian stimulus at the moment, and the federal government needs more tax dollars, not fewer.

The Trump administration instead could press Congress to reverse the 2017 cuts.

The administration also could make a meaningful difference by collecting more of the taxes that corporations and the wealthy still owe. The government estimated in 2010 that Americans failed to pay about $400 billion in taxes. Since then, Congress has continued to cut funding for the Internal Revenue Service. That has particularly affected the agency’s ability to audit large corporations and wealthy households, because it lacks the muscle for those fights.

The I.R.S.’s head explained in a September letter to Congress that the agency audits low-income households at the same rate as high-income households because it doesn’t have the resources for the harder fights. A ProPublica story highlighting Microsoft’s success in fending off the I.R.S. illustrates the difficulty. The agency is still in a long-running battle over the company’s 2005 taxes, and the end is not in sight.

But it’s too much to hope facts will alter the policies of the Trump administration. Mr. Trump is touting the tax cuts as a signature triumph as he runs for re-election. It will be up to voters to hold the administration accountable for the actual results.

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