The Indicator from Planet Money Will the tax cuts pay for themselves?
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Jul 8, 2025 The One Big Beautiful Bill Act is setting off a $3.4 trillion deficit bomb, driven by major tax cuts. Experts explore whether these cuts can truly pay for themselves or if it's just a myth. Dive into the Laffer Curve theory, which claims lower tax rates might boost revenue, but then scrutinize the evidence suggesting otherwise. Discussions reveal a consensus that recent tax cuts could hurt government revenue, raising questions about their long-term implications for businesses and workers.
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Big Cost From Tax Cut Extensions
- The One Big Beautiful Bill Act will increase the deficit by $3.4 trillion over 10 years according to the CBO.
- Most of the cost comes from extending 2017 Trump tax cuts and adding new ones, making it very expensive.
Arthur Laffer Praises Tax Cuts
- Arthur Laffer, the guru of the Laffer curve, advises presidents including Trump pro bono.
- He claims the 2017 tax cuts paid for themselves and significantly boosted prosperity and lowered poverty rates.
Tax Cuts Don’t Fully Pay Themselves
- Tax cuts may increase economic activity and tax revenue slightly but don't fully offset lost revenue.
- More realistic analyses show growth might pay for about 19% of current tax cuts, not the entire cost.