Republicans campaigned on a promise of pro-growth tax reform. The Congressional Budget Office projects that tax revenue will grow above historical norms for the foreseeable future. In a sane world, this would mean that most taxpayers can expect a sizable tax cut.
Alas, U.S. fiscal policy lacks any sanity. Uncontrolled federal spending has made reasonable tax reform very difficult. On the unreasonable side are those who call for “revenue-neutral” tax reform. That’s simply a call to build tax increases into tax reform. Under what is called “baseline revenues” — revenue projected into the future — tax receipts as a percent of the economy grow year over year, due to real bracket creep and other economic factors.
So when Senate Majority Leader Mitch McConnell (R-Ky.) said tax reform “will have to be revenue-neutral,” what he was really saying was that it will have to maintain those year-over-year tax increases assumed in the baseline. In 10 years, the federal government is projected to collect an inflation-adjusted $1 trillion more than it did last year.