The Treasury Department said Monday that the Senate-approved tax reform plan would pay for itself and more, actually boosting revenue by $300 billion over 10 years.
The one-page analysis by Treasury counters a congressional forecast that the tax cuts would add about $1 trillion in deficits over the next decade.
Treasury said the legislation, which cuts corporate and individual taxes, would result in $1.8 trillion in additional tax revenue over a decade by spurring stronger economic growth. Subtracting tax cuts of $1.5 trillion from the measure under current law, the administration said, adds up to a gain.
“The administration has been focused on tax reform and broader economic policies to stimulate growth, which will generate significant long-term revenue for the government,” said Treasury Secretary Steven T. Mnuchin.
Treasury’s analysis forecasts annual economic growth of at least 2.9 percent, higher than the 2.2 percent estimates used by the congressional Joint Committee on Taxation.
“Treasury expects approximately half of this 0.7 percent increase in growth to come from changes to corporate taxation,” the report said. “We expect the other half to come from changes to pass-through taxation and individual tax reform, as well as from a combination of regulatory reform, infrastructure development, and welfare reform as proposed in the administration’s fiscal year 2018 budget.”
But the nonpartisan Committee for a Responsible Federal Budget said Treasury’s analysis is flawed, and seems to be geared to reaching a pro-administration conclusion.
“The Treasury Department doesn’t estimate the tax bill will help get us to 2.9 percent sustained growth, it just assumes it,” said CRFB President Maya MacGuineas. “Rather than modeling the macroeconomic effects of the Senate tax bill, they simply take the same fantastical assumptions they made in the president’s budget and apply them to the tax bill.”
She said any accurate government forecast “relies on sophisticated models to determine the effect of tax changes on labor, investment, interest rates, and income growth.” Every “true” estimate by Congress has found that the tax cuts “will have a much more modest effect on the economy than what the Treasury claims,” Ms. MacGuineas said.
Before the Senate narrowly approved the tax-cut plan a week ago, Republican leaders criticized the JCT analysis for underestimating growth. Gross domestic product has topped 3 percent in each of the past two quarters.
Senate Majority Leader Mitch McConnell, Kentucky Republican, said he was confident the Senate bill was “revenue-neutral” or would actually become a “revenue producer.”
House and Senate negotiators are working to complete the package within the next two weeks.
The liberal super PAC American Bridge called Treasury’s analysis “a joke.”
“It’s like saying, ‘I could fly if I could grow wings,’ ” said American Bridge Vice President Shripal Shah. “The fact that the Trump administration had to doctor a study with fake calculations about major plans that don’t even exist yet is a glaring admission of guilt.”