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Study: GOP tax plan would cost $2.4 trillion

Study: GOP tax plan would cost $2.4 trillion
© Greg Nash

The GOP's tax plan would cause revenue to drop between $2.4 trillion and $2.5 trillion over the course of a decade, even after economic growth is taken into account, according to an analysis from the Urban-Brookings Tax Policy Center.

The Tax Policy Center's initial September analysis of the plan drew fire from some conservatives for not including the effects of economic growth on revenues.

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The updated report found almost no difference with growth effects, called dynamic scoring.

"The outline would reduce federal tax revenue by roughly $2.4 [trillion] over the next decade, nearly the same as under conventional scoring," the Tax Policy Center's Howard Gleckman wrote in a blog post on the matter.

In the second decade, the center added, revenues would fall by $3.4 trillion.

"While the Framework’s tax rate cuts would generate new economic activity at first, those growth effects would be washed out in a few years by the effects of higher budget deficits. Because the federal government would have to borrow more to finance the tax cuts, less money would be available for private investment," Gleckman wrote.

The Trump administration has argued that economic growth stimulated by the tax breaks would bring in enough revenue to cover most-to-all of the revenue lost by the tax cuts.

On Thursday, the GOP adopted a budget that would allow up to $1.5 trillion in deficit-financed tax cuts. The party is struggling to find a way offset nearly $4 trillion in additional revenue losses incurred by their proposed cuts.

Earlier Friday, the White House Council of Economic Advisers released an analysis that said GDP would grow between 3-5 percent as a result of the tax plan.

Economists were skeptical.

"They cherry-picked analyses that aren't unreasonable, but they only looked at the ones that were favorable to their outlook," said Marc Goldwein, the Senior Policy Director at the fiscally conservative Center for a Responsible Federal Budget.

A prior Council of Economic Advisers paper arguing that the tax plan would accrue large benefits for workers had also come under fire. One of the authors cited in that paper said the council had misinterpreted the results.