Tax Reform Cuts Medicare, Medicaid, Social Security, Adds $2.4 Trillion to Federal Debt-Disputed!
Summary of eRumor:
Claims that the GOP’s 2017 tax reform cuts Medicare, Medicaid, Social Security and education circulated in December 2017.
The Truth:
When it comes to whether or not claims that GOP tax reform cuts Medicare, Medicaid, Social Security and education are true — it depends on who you ask.
Opponents argue that the tax cuts will slash revenues, leading to a $2.4 trillion deficit over 10 years. And cutting Medicare, Medicaid, Social Security and education will be the only way to absorb the tax cuts.
Supporters of the tax cuts, however, argue that economic growth driven by the tax cuts would help replace the lost revenue. And eliminating deductions, closing special interest loopholes and encouraging American companies to repatriate offshore money with a lower corporate tax rate will take care of the rest.
Predicting the impact of tax policy is incredibly complicated. But we’ll take a look at common claims about the GOP”s 2017 tax reform efforts.
Tax Reform Will Increase the Federal Deficit By $2.4 Trillion
This claim comes from the Urban Institute and Brooking Institutions’s Tax Policy Center. It released a study in September 2017 that found GOP tax reform framework would reduce federal revenue by $2.4 trillion over the first decade, and by $3.2 trillion over the second decade.
The study found that tax rates for all earners would fall in 2018. The highest income earners would see the biggest cuts. By 2027, those in the 80th to 95th income percentiles would see their taxes increases under the framework, the study found.
The Tax Policy Center study used “static scoring,” which does not take into account economic growth generated from tax cuts. And those who do support the tax reform plan prefer to use “dynamic scoring,” which does.
The Joint Committee on Taxation (JCT) released a study in November 2017 that used dynamic scoring. It found that the federal deficit would increase by $956 billion over the first decade. And, with debt service factored in, the cost would exceed $1 trillion, JTC concluded.
Meanwhile, the White House has more aggressive dynamic scoring to argue that the tax reform bill would “pay for itself.” Treasury Secretary Steve Mnuchin said during a press conferences, “This will pay for itself with growth and reduced deductions.”
In conclusion, nobody knows tax reform’s impact on the federal deficit. Those who rely on static scoring believe tax reform will add $2.4 trillion over 10 years. Those who rely on dynamic scoring believe it will add $1 trillion over 10 years. And the White House believes it will add zero dollars. The answer lies somewhere in between.
Tax Reform Cuts Medicare, Medicaid, Social Security
Again, whether or not tax reforms cut Medicare, Medicare and Social Security depends on who you ask. Those who believe that the tax cuts will be deficit-neutral, not adding anything to the deficit, would argue that no cuts to entitlement programs would be needed.
However, those who argue that GOP tax reform will add $2.4 trillion to the deficit over 10 years believe that deep cuts to Medicare, Medicaid and Social Security will take the brunt. U.S. Sen. Bernie Sanders (I-VT) said in a Senate Budget Committee hearing, “I have not the slightest doubt that if this bill, God forbid, as soon as it is passed, the Republican leadership will come back and say, “by God, we have to deal with the deficit,” and that’s why we’re going to cut Social Security, Medicaid and Medicare.'”
Sanders’ comment resurfaced on December 7th when House Speaker Paul Ryan indicated that the House would address the deficit by cutting Medicare, Medicaid, Social Security and welfare spending. “… Frankly, it’s the health care entitlements that are the big drivers of our debt, so we spend more time on the health care entitlements — because that’s really where the problem lies, fiscally speaking,” Ryan said.
Although the GOP is eyeing cuts to Medicare, Medicaid and Social Security, Ryan and others would not attribute that to tax reform. They believe tax reform will be “revenue-neutral,” or not add to the deficit. So, they would say entitlement cuts are to address the existing federal deficit, not new debt.
Given all that, we’re calling claims that tax reform cuts Medicare, Medicaid and Social Security “disputed.”