Congress is about to horn in on our tax cut debate. Up against Congress’ $4 trillion plus issue our $2.2 billion in tax cuts looks tiny.
President Donald Trump is pushing Congress to not only sustain tax cuts from his 2017 Tax Cuts and Jobs Act (TCJA) but to add to them.
The TCJA cuts will expire this year unless Congress extends them. Over 10 years the projected cost to extend would be the $4 trillion.
Expiring benefits include higher standard deductions and lower tax rates for individual taxpayers, the pass-through small business tax deduction, and higher child tax credits, estate tax exemptions, and alternative minimum tax exemptions.
Corporate tax cuts are not expiring. They were made permanent in 2017 while the individual tax cuts were not. However, the President now wants to lower corporate rates from 21% to 15%.
He has also called for eliminating taxes on Social Security, overtime pay, and tips. Along with a corporate tax reduction, all these would almost double the $4 trillion cost.
Naturally, the President wants this all done sooner than later. So, Republicans in Congress are moving quickly to utilize the controversial budget reconciliation process, which avoids Senate filibusters and can affect entitlement spending, to push a bill to passage.
Debate is already hot and heavy over what to include in the reconciliation bill and how to offset the costs. With the federal debt now exceeding $36 trillion and the latest annual budget deficit exceeding $1.9 trillion, deficit hawks are pushing hard for the reconciliation bill to include massive spending offsets to avoid additional debt.
Those offsets could have significant impact in Mississippi which depends on federal funds for well over 50% of its annual budget. Particularly at risk are funds for education, healthcare, and agriculture.
For reference, about 61% of the annual federal budget (about $4 trillion) goes for mandatory spending. That includes Social Security (22%), Medicare (13%), Medicaid, CHIP, and ACA (11%), agriculture (1%), and other income support programs (14%).
Another 28% (about $1.7 trillion) goes for discretionary spending. That includes defense (13.5%), veterans’ benefits (2.1%), education (2.0%), transportation (1.9%), non-mandatory health (1.6%), international affairs (1.4%) and various other federal departments and agencies (5.9%).
The final 11% (about $700 million) goes for debt service (2023 numbers).
All this makes the Mississippi Legislature’s debate over $2.2 billion in personal income tax cuts phased in over 12 years seem like small potatoes. It will become big potatoes for many if federal budget cuts play havoc with our future tax revenues.
“Since no one knows the future, who can tell someone else what is to come” – Ecclesiastes 8:7
Crawford is the author of A Republican’s Lament: Mississippi Needs Good Government Conservatives.
