How did the 2017 Tax Cuts and Jobs Act affect federal revenue and deficits from 2017 to 2020?
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Executive summary
The Tax Cuts and Jobs Act (TCJA) of 2017 materially reduced federal revenues and raised deficits in its first years: official and independent scores projected roughly $1–2 trillion of added deficits over the law’s first decade, and analysts agree the law did not "pay for itself" through growth [1] [2] [3]. Between enactment and the end of 2020 the law coincided with lower-than-projected revenues relative to pre‑TCJA baselines and contributed to higher deficits even before the COVID shock amplified budget shortfalls [2] [4].
1. How much revenue was lost and what did official scores say?
Congressional scorekeepers and independent analysts estimated large revenue losses: the Joint Committee on Taxation initially projected about $1.5 trillion of lost revenue over a ten‑year window [1], while many conventional static counts and other analyses put decade‑long revenue reductions between about $1.5 and $2.0 trillion [3] [2]. The Congressional Budget Office and the Joint Committee’s published estimates all showed TCJA substantially reducing revenues and increasing deficits in its first decade [2] [1].
2. What happened to deficits and federal debt through 2020?
Analyses contemporaneous with and after enactment concluded the TCJA increased deficits materially: the Tax Policy Center summarized that the law would add roughly $1–2 trillion to federal debt in its initial decade depending on scoring and baseline choices [2], and CBO estimates incorporated by commentators similarly showed increases in projected deficits tied to the tax cuts [5] [6]. The Committee for a Responsible Federal Budget reported that CBO estimated the law would add about $1.8 trillion to deficits (excluding interest) through FY2028 on a conventional basis or $1.3 trillion after dynamic effects [6].
3. Did economic growth offset the revenue loss between 2017–2020?
Growth softened but did not erase revenue losses: virtually all mainstream models and JCT analyses concluded the tax cuts would not fully pay for themselves, and dynamic scoring reduced but did not eliminate the projected deficit increase [1] [3]. Empirical work through 2019 and through 2020 shows some pickup in business investment and wages in the short run, but most analysts find those effects were too small to recoup the revenue losses; the Federal Reserve and academic reviews warned the boost to growth would be modest and that tighter monetary policy and later shocks limited gains [7] [8] [1].
4. What role did temporary provisions, baselines and the pandemic play?
Assessment of 2017–2020 outcomes depends on baseline choice and the temporary nature of most individual provisions: many individual tax cuts were set to expire after 2025, which shaped scoring and later debates about permanence and long‑run deficit effects [1] [9]. Revenue comparisons also diverge by whether analysts used the 2017 or updated 2018 CBO baseline; using the 2018 baseline, revenues from 2018–2020 were below CBO’s post‑TCJA forecasts by a combined amount though later years reversed some shortfalls [4] [2]. Finally, the COVID‑19 recession and emergency spending in 2020 overwhelmed budget dynamics and widened deficits well beyond TCJA’s direct effects, complicating attribution of year‑by‑year deficit changes [4] [6].
5. Bottom line and unresolved questions
The consensus across official scorekeepers, academic reviews, and budget watchdogs is that TCJA reduced federal revenues and raised projected deficits materially in its decade window, with estimates commonly in the $1–2 trillion range of additional deficits and stronger long‑run exposure if cuts were made permanent [1] [2] [6] [9]. Analysts disagree on the magnitude of growth offset and on distributional consequences, and policy choices since 2017 (e.g., whether to extend expiring provisions) determine whether the initial revenue losses become longer‑term debt increases—an open policy question tied to future Congressional action [3] [9] [10].