The announcement seemed to come at the right time—and the right place. At a spring campaign dinner with billionaires and other wealthy donors who gave a record $50.5 million, former president and presumptive GOP nominee Donald Trump reportedly promised to renew the tax cuts for billionaires and billionaire corporations that are set to expire in 2025, according to NBC News. In the weeks since, as Trump has increasingly used fundraisers to offer tax giveaways to donors, the House Majority Leader Steve Scalise (R-La.) has proposed using the budget reconciliation process to renew expiring tax cuts without the need for a 60-vote Senate majority or bipartisan consensus, The Hill reported.
That Trump wants to extend his 2017 Tax Cuts and Jobs Act should come as no surprise. The TCJA was a legislative priorities he accomplished during his term in office. But it dramatically increased the national debt and was arguably a senseless giveaway to foreign investors, a topic I wrote about in March. Another one of the law’s troubling elements was a new deduction for owners of so-called pass-through businesses. The provision was 50 times more likely to help the top 1% of earners—those who are more likely to have these types of businesses—than those in the bottom 50% of the income spectrum, according to the Center on Budget and Policy Priorities.
From the investor perspective, this isn’t about liberal or conservative policies. It’s about policies that grow the economy for the long term versus policies that don’t.
Tax cuts for billionaires are a bad deal for the vast majority of investors. Extending the TCJA in full would cost more than $3.3 trillion—$3.8 trillion with interest—through 2033, by one estimate from the Committee for a Responsible Budget. Drilling down, extending the pass-through deduction in 2025 for companies favored by hedge funds and private equity firms would increase the debt dramatically, by an estimated $700 billion, per the CRFB—with little to show for it in terms of net new economic activity.
Look at 2023. The level of deficits and revenues were unusual given the strength of the economy and low unemployment last year, according to the Council of Economic Advisors. The CEA analysis related this back to the “revenue-reducing impact” of the 2017 tax cuts. That means the economy was otherwise healthy, growing and creating jobs in the short term.
However, the one-two punch of high-interest payments on the debt and reduced revenues resulting from the 2017 tax cuts left less to invest in the years that followed. Proven drivers of sustained and broad-based economic growth, like investments in critical infrastructure and innovation, help the vast majority of investors.
While the 2017 tax cuts benefited billionaires in the short run, over the long term, the picture is different. The U.S. Treasury has already taken out more than $34 trillion in debt. The CRFB says that Americans effectively service that debt through higher future taxes, lower future spending, lower wages, and an increasing share of their tax dollars paying interest to cover past consumption. Of course, there are times and places for countries to take on debt—especially for productive investments that power the economy and create equitable growth.
But now the evidence is in: extending tax giveaways for the wealthiest political donors is not a smart policy. In addition to hurting the U.S.’ potential for economic growth, giveaways to billionaires increase the hyper-concentration of wealth that contributes to long-term political instability. Again: it’s bad for the majority of investors—including patriotic billionaires—and that should matter.
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