Tax Bill Highlights the Collapse of GOP Policymaking
The party chose spin over substance. And the spin is not working.
(Originally published in The Dispatch)
Republicans vociferously claim their tax legislation—the One Big Beautiful Bill Act passed by the House and working its way through the Senate—would unleash an economic boom so colossal that its resulting tax revenues would offset the entire cost. This dubious boast was shredded by a recent Congressional Budget Office (CBO) reality check showing that the bill’s broader economic effects actually increase the 10-year cost projection by $356 billion.
According to this “dynamic score,” the bill is so poorly designed that it would fail to produce any significant long-term increase in economic growth. Instead, the tiny amount of growth revenues would be swallowed by $441 billion in added 10-year federal debt interest costs that would result from the bill raising interest rates across the economy and on the entire federal debt. Those “dynamic” interest costs from rising rates are in addition to $551 billion in interest costs that would be paid specifically on the bill’s $2.4 trillion in 10-year borrowing.
Rather than address the bill’s extraordinary cost, Republicans responded by attacking the CBO. They challenged the agency’s historical accuracy by claiming that it failed to competently score the 2017 Tax Cuts and Jobs Act (TCJA)–even as CBO’s subsequent revenue estimate achieved 99.5 percent accuracy up until the pandemic. President Donald Trump accused the CBO of being run by Democrats even though its director is a Republican. Sen. Tim Scott produced a video claiming that CBO also erroneously scored tax cuts in the 1930s and 1960s—which is impossible because CBO did not exist until 1974, not to mention that those 1930s tax cuts actually took place in the 1920s. All because the CBO refused to pretend that the House Republican tax bill would pay for itself or even offset a portion of the cost.
A more serious political party would have acknowledged that CBO’s analysis aligned with virtually all tax modeling organizations on the left and right—including the conservative Tax Foundation—and then committed itself to fixing the bill. Instead, Republican economic policy in 2025 is much like Democratic economic policy under President Joe Biden: lazy special-interest pandering combined with an almost mystical belief in an economic nirvana that never arrives.
Tax relief becomes a religion.
The Laffer curve, a theoretical construct favored by supply-side economists, observes that tax revenues will peak at a tax rate somewhere above 0 percent but below 100 percent. In cases where the tax rates exceed the revenue-maximizing rate, a tax rate reduction will increase revenues by encouraging an expansion of taxable economic activity that is substantial enough to outweigh the losses from the reduced tax rate. More broadly, supply-side economists note that, in certain situations, certain tax reductions can expand the economy by increasing incentives to work, save, invest, and be productive. The resulting additional tax revenues can offset a modest portion of the tax cut cost.
Today’s Republicans have parodied the Laffer curve into a religious belief that is totally divorced from economic reality. They treat nearly all tax reductions as magically igniting economic expansions vast enough to increase total tax revenues. Sen. Scott summarizes in the aforementioned video that, “The Laffer curve is right. If you lower taxes, you increase production, and that means more revenue for the government. It always has worked. I think it always will work.” That is definitely not how the Laffer curve or tax policy works, as even conservative economists will confirm.
Neither the 1980s Reagan tax cuts, 2001 Bush tax cuts, nor 2017 Trump tax cuts came close to paying for themselves in increased tax revenues from economic growth. That is because the vast majority of tax rates are already well below the peak rate of the Laffer curve. Current lawmakers are not rescuing taxpayers from (non-existent) 70 percent tax brackets that had been losing revenues, but instead focusing on adding new carve-outs and trimming marginal tax brackets from, say, 25 percent to 23 percent.