Republicans have made a very big deal pitching their tax reform plan as an elixir for economic growth.
But a new nonpartisan analysis of the Senate tax bill suggests that while it will spur some additional economic growth, it won’t be nearly enough to compensate for the full cost of the bill’s provisions, which include tax cuts for businesses and individuals.
The Joint Committee on Taxation, the Congressional scorekeeper for tax bills, estimates that the Senate tax bill could generate enough growth to create nearly $408 billion in net new revenue over a decade. But even with that additional revenue, the bill would still add an estimated $1 trillion to deficits.
JCT’s macroeconomic analysis — also known as a dynamic score — falls far short of Treasury Secretary Steven Mnuchin’s oft-made claim that the proposed tax cuts will pay for themselves.
The analysis takes into account the interaction of several factors on the economy, including the bill’s lower tax rates, its repeal of various tax breaks and its proposed international tax reforms with debt, labor force participation, employment and consumption.
The JCT said it expects the bill will increase the labor supply and investment in the first several years. But those effects are expected to diminish after 2025, when a number of provisions in the bill are slated to expire.
Soon after JCT’s analysis came out, a spokesperson for the Republican-led Senate Finance Committee pushed back. The JCT analysis is incomplete, she said, because it doesn’t reflect the “final outcome of the evolving Senate tax bill — which will be amended on the floor this week.”
Senate Republicans were hoping to vote on the bill by Friday.
Republicans have been pushing for dynamic scoring as a way to show the true benefits of tax cuts on the economy.
But House Republicans passed their own tax bill — before the JCT had a chance to give it a dynamic score.
Both the House and Senate tax bills have been rushed through the legislative process in Republicans’ bid to get a win on the board and tax reform legislation to President Trump’s desk by Christmas.
The Treasury, meanwhile, has not released any macroeconomic analysis backing up Mnuchin’s claim that tax cuts — or the tax bills on the table — will pay for themselves.