Trump Tax Cut Extension Would Cost $4.6 Trillion: CBO

Trump Tax Cut Extension Would Cost $4.6 Trillion: CBO

By Yuval Rosenberg and Michael Rainey
Thursday, May 9, 2024

Happy Thursday! Today we learned that Hawaii is poised to make the "shaka" — you may know it as the "hang loose" sign, in which the thumb and pinky finger are extended while the others are curled down — its official state gesture, the first such designation in the country. Here in New York, we’ve only got an unofficial gesture and it involves a different finger, but we’re plenty proud of it too.

Here’s what else is happening.

Extending Trump Tax Cuts Would Cost $4.6 Trillion: CBO

Lawmakers in Washington will need to address some serious fiscal questions next year, not least of which is what to do about Trump-era tax cuts set to expire at the end of 2025.

Some in Congress want to extend the expiring provisions of the 2017 tax cuts, which were signed into law by then-President Donald Trump after passing through Congress with overwhelming Republican support, but according to a new analysis published by the Congressional Budget Office, doing so would come at a substantial price: $4.6 trillion over 10 years.

Analysts from CBO and the Joint Committee on Taxation found that extending the tax cuts for individuals would reduce federal revenues by roughly $3.3 trillion over a 10-year period ending in 2034. Interest costs would also climb, with net interest outlays rising by $467 billion over a decade.

The 2017 tax law also included provisions cutting taxes on estates, gifts, investments and some types of small business income; extending those cuts would cost $717 billion, plus another $138 billion for interest.

The total cost comes to roughly $4.6 trillion. (The table from the CBO report showing the breakdown of the costs is below.)

Framing the debate: Democrats have long complained that the Trump tax cuts were fiscally irresponsible and tilted toward the wealthy, and President Biden has vowed to let them expire. "By the way, that tax credit of his expires next year," he said in April, referring to Trump. "Well, let me tell you something: It’s going to stay expired and dead forever if I’m reelected."

However, Biden has also vowed not to raise taxes on anyone making less than $400,000 a year, and Treasury Secretary Janet Yellen recently told lawmakers that the president intends to keep that promise if he wins a second term. Biden, she indicated, would allow the 2017 tax cuts to continue for families earning less than $400,000, with the revenue losses to be made up by as-yet unspecified tax increases in other areas. "The president has been very clear that no family earning less than $400,000 will face a tax hike," Yellen said.

Senate Budget Committee Chair Sheldon Whitehouse echoed Biden’s call for letting the tax cuts expire. "Remember the Trump tax scam cutting taxes for billionaires and big corporations. Now they’re set on extending those tax cuts, even though it would blow up the deficit," he said in a statement Wednesday. "The Trump tax cuts were a gift to the ultrarich and a rotten deal for American families and small businesses. With their impending expiration, we have a chance to undo the damage, fix our corrupted tax code, and have big corporations and the ultra-wealthy begin to pay their fair share."

Republicans continue to defend the tax cuts while promising to extend them. In a statement, Ways and Means Committee Chairman Jason Smith and House Budget Committee Chairman Jodey Arrington pushed back against the CBO report, claiming the agency’s "track record in predicting the economic and fiscal outcome of the 2017 Trump tax cuts is poor to say the least."

"The truth is, the Trump tax cuts resulted in economic growth that was a full percentage point above CBO’s forecast, and federal revenues far outpaced the agency’s predictions," they said. "Republicans believe working families do not need the IRS taking any more out of their pockets."

The bottom line: Extending the Trump tax cuts would be enormously costly in budgetary terms, but you can expect to see a serious effort to do so. The fight over those tax cuts is already starting.


Drugmakers in Medicare Price Talks Spent Less on R&D Than on Shareholders, Marketing, Overhead: Report

Eight drug companies that make the 10 medications whose prices are currently being negotiated by Medicare spent billions more last year on stock buybacks, dividends, marketing and administrative costs than they did on research and development, according to a report from Accountable.US, a left-leaning watchdog group.

The report says that the eight companies — Johnson & Johnson, Amgen, AstraZeneca, Bristol Myers Squibb, Eli Lilly, Merck, Novartis and Novo Nordisk — spent $95.9 billion on research and development expenses, compared to $162 billion on stock buybacks, dividends, and marketing and administrative costs and almost $500 million on compensation for their boards and executives.

"Additionally, these companies spent at least $83.2 million on trade association dues, $10.6 million on political contributions and $57.8 million on lobbying, all in 2023 alone," Accountable.US adds. "Meanwhile, these companies pulled in a combined $367 billion in sales in 2023, according to their financial filings."

The group says that four of the companies — Johnson & Johnson, Bristol Myers Squibb, Novartis and Novo Nordisk — spent more on various shareholder payments than on research and development. Five companies spent more on administrative and marketing expenses than R&D. Only Merck put more toward research and development than it spent on shareholder payments, executive compensation, marketing and administrative costs.

Six of the companies have sued to block the Medicare price negotiations, enacted for the first time under the Inflation Reduction Act of 2022.

"Big Pharma CEOs often cite investments in R&D to excuse charging U.S. seniors the highest prices in the world for life-saving medicines – but they never put that spending in proper perspective," Accountable US Executive Director Tony Carrk said in a statement. "The fact is, pharma industry R&D investment is vastly outpaced by billions upon billions in industry profits, rewards to wealthy investors, and on lobbying and political spending sprees."

A spokesperson for the Pharmaceutical Research and Manufacturers of America trade group dismissed the report when reached by The Hill. "This comparison is a myth we hear often. It often lumps together marketing with everything from shipping to distribution to office supplies," they said. "The truth is the biopharmaceutical industry is one of the most research-intensive industries in America. Companies invested $122 billion in R&D in 2020, and we invest six times more on average in R&D as a share of sales than all other manufacturing industries."

Number of the Day: $10.8 Million

The Department of Veterans Affairs improperly awarded nearly $11 million in bonus payments to 182 senior executives last year, and though it sought to cancel the payments, some of the funds have yet to be recouped and some recipients are challenging an order to repay the money.

As detailed in a new report by the VA’s Office of Inspector General, the department announced in September 2023 that it had erroneously made "critical skill incentive (CSI) payments" ranging from nearly $39,000 to over $100,000 to executives in its central office. Those CSI payments were meant to help recruitment and retention of employees who possess "a high-demand skill or skill that is at a shortage." The inspector general found that nearly all the payments in question "lacked adequate justification" and were inconsistent with the law and VA policy.

"The episode exposes a litany of blunders and missing safeguards within VA as its top leaders disregarded rules to hand payouts to all career senior leaders in the D.C. headquarters of the health and benefits systems — then failed to keep [VA Secretary Denis] McDonough and others informed about the plan," writes The Washington Post’s Lisa Rein, who first reported on the inspector general’s findings.

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