The amount of revenue the U.S. government collects from federal taxes has shrunk in the first full year since the Tax Cuts and Jobs Act became law, Treasury Department data show. That is noteworthy given the economy’s strong performance last year — tax revenue typically increases in periods of expansion, fueled by rising corporate profits and worker wages.
Federal tax revenue declined less than 1 percent to $3.33 trillion in 2018, when lower tax rates for corporations and individuals went into effect. At the same time, government spending rose more than 4 percent last year. That combination of lower tax receipts and higher outlays is widening the country’s budget deficit.
The dip in federal tax revenue comes as the nation’s debt hit a. That amounts to 80 percent of the country’s GDP and represents the highest level of debt for the U.S. since World War II.
The only countries with a higher debt load than the U.S. are Portugal, Italy, Greece and Japan — with the first three countries a byword for fiscal problems.
A Treasury spokeswoman said the Tax Cuts and Jobs Act cut taxes, and therefore government revenue, while describing the overhaul as “positive news for taxpayers.”
“Most people are seeing the benefits of the tax cut in larger paychecks throughout the year, instead of tax refunds that are the result of people overpaying the government,” the spokeswoman said. “Smaller refunds mean that people are withholding appropriately based on their tax liability, which is positive news for taxpayers.”