Does lowering tax rates in practice pay for itself by generating more taxable economic activity?

I'm David Rancaccio.

Key parts of the 2017 tax cuts expire at the end of this year.

The Trump administration is very interested in Congress, making them permanent, but that could be expensive.

Supporters of a tax cut extension say it would pay

for itself, but would it? Did that happen back in 2017? Marketplace's Nancy Marshall-Gensar

takes a look. If you just look at the raw numbers, it does seem like the 2017 tax cuts paid for

themselves. From 2018 to 2024, the federal government took in one and a half

trillion dollars more than the Congressional Budget Office had projected. But about two-thirds of

that comes directly from inflation. Maya McGinnis is president of the Committee for a responsible

federal budget. But if you just it for inflation and look at the real numbers, there was no higher than

expected gains.

So, she says, the increased revenue didn't come from economic growth driven by the tax cuts.

Companies did take in more revenue, but it was because with inflation soaring, they charged

higher prices.

Kimberly Clause, Professor of tax law and policy at UCLA, says businesses did report higher profits on their tax returns.

Because they're selling their goods for higher prices, but they haven't already adjusted the wages for their workers.

So the revenues are going up, but the costs aren't going up

as much as the revenues. So that can also drive higher corporate and business tax revenue.

Clausing says federal tax collection also got a one-time bump in 2022 as investors paid

capital gains taxes on soaring stock profits from 2021.

Clausing doesn't think the stars will align this way again,

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