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Justin Fox

Now We Know How Much the Tax Bill Really Cost

At least, we have one year’s worth of inflation-adjusted data on post-tax-cut revenue. It’s down a bunch.

Let’s make some adjustments.

Let’s make some adjustments.

Photographer: Andrew Harrer/Bloomberg

In the 12 months after the Tax Cuts and Jobs Act took effect Jan. 1, 2018, federal government receipts fell by $13.7 billion, or 0.4 percent, while outlays rose $176.7 billion, or 4.4 percent. Those aren’t official numbers, because the Monthly Treasury Statement for December isn’t out yet and probably won’t be until the partial government shutdown is over. But the lights are still on at the Congressional Budget Office, and it released revenue and spending estimates for December on Tuesday.

At first glance, this makes it look like (1) the tax cuts did in fact cut taxes, as promised, but (2) the revenue loss was much smaller than the increase in spending, so the $190.5 billion increase in the federal deficit from calendar-year 2017 to 2018 is almost entirely due to higher spending. This is a popular refrain among supporters of the tax cuts, but it is incorrect. For one thing, it ignores inflation. And with December inflation numbers out today from the Bureau of Labor Statistics, we don’t have to do that!