CBO Misses Again: Post-TCJA Corporate Tax Revenue Exceeds Predictions

Last week, the CBO released fiscal year 2024 numbers showing that corporate receipts came in at $529 billion. This number exceeded the $525 billion forecast in CBO’s June report and substantially exceeded CBO’s $421 billion prediction made after the passage of the Tax Cuts and Jobs Act (TCJA).

This significant disparity between the CBO’s estimates and the actual data should give Americans pause next time they’re shown numbers that predict devastating outcomes from tax cuts. In reality, corporate tax cuts grow the economy, increase jobs and wages, and lower costs for consumers.

Despite Democrats asserting for years that TCJA would bankrupt the country, it is now obvious that was not true:

To be clear, tax revenues are not and should not be the only factor when considering the efficacy of a corporate income tax cut or hike. The reason the CBO’s estimates have been so inaccurate is because they do not consider the economic growth that occurs after a rate cut. Most importantly, regardless of when the loss in revenue is completely “paid for” in growth, the real benefits are delivered to workers and consumers.

The corporate income tax is passed on, almost entirely, to workers and consumers. Therefore, any reduction is a benefit to the American people.

A 2020 study by the National Bureau of Economic Research found that 31 percent of the corporate tax falls on consumers. In a 2017 report, Stephen Entin of the Tax Foundation argued that 70 percent of corporate taxes are borne by labor. Other economists argue that anywhere from 20 percent to 50 percent, to even 100 percent of the tax hits workers in the form of lower wages and reduced jobs.

In fact, ATR has compiled a list of 1,233 examples of pay raises, new job creation, facility and product line expansions, special bonuses, utility rate reductions, 401(k) match increases, and employee benefit increases attributed to the TCJA.

Tax revenue arguments are the primary way Democrats try to scare the American people into opposing having more money in their own pockets. Still, they cannot escape the simple fact that businesses and individuals will always spend money more efficiently than the government can. Without taking this into account, tax cut revenue predictions will always be insufficient. Certainly, these predictions are not compelling tools for villainizing policies that, objectively, help the American people.