Every month the Treasury publishes a report that lists government revenues and expenditures. I wrote an article in October which argued that a fair evaluation of the Trump Tax Cut’s impact on the deficit should do the following:
- Start being evaluated in January 2018 (since that’s when the law took effect), NOT fiscal year 2018, which starts in Oct 2017
- Take inflation into account; so use constant 2018 dollars
- Only evaluate the revenue categories which are realistically impacted by the tax cuts; so exclude excise taxes, customs duties, and Federal Reserve earnings
- Recognize that just matching 2017’s revenues should be seen as OK but not great – a more realistic target is to grow revenues by 1-3% per year, especially in a growing economy
The first two points seem fairly obvious, but even the Wall Street Journal misleadingly ignored them when making a case that the tax cuts weren’t feeding the deficit (subscription required). When taking this all into account, after the September month-end report came out, our “Trump tax deficit metric” was deep in the red, down $66.8B or 2.7%. This was driven primarily by a large dropoff in corporate tax revenue. So, how are things looking now that we’re in December?
| | Jan-Nov 2017 ($ Billions) | Jan-Nov 2018 ($ Billions) | Difference ($ Billions) | Difference (%) |
| Personal | 2,620.7 | 2,631.6 | 10.9 | 0.4% |
| Corporate | 227.5 | 146.9 | -80.6 | -35.4% |
| Combined | 2,848.2 | 2,778.5 | -69.7 | -2.4% |
We’re now down $69.7B compared to last year, or 2.4%. Here is the month-by-month chart for Corporate tax receipts, which is the primary driver of the difference between 2017 to 2018:
And that’s the tiny glimmer of hope – as you can see, October and November were the first months that saw an increase in corporate tax receipts (although on a very small scale, and it was more than wiped out by decreases on the personal tax side). A bigger test will be when December receipts get released in a few weeks, so I’ll put out an update then. And to put the overall numbers into perspective, here’s a gauge that shows the dollar and percentage change from last year, with red representing a loss of 1-3%, yellow representing a loss of 1% to a gain of 1%, and green representing a gain of 1-3%. As you can see, we’re still firmly in the red; I’ll continue to track through next year to see if we get close to the green.
