Finance

JCT says Senate tax bill will add $1T to deficits, even with growth

Greg Nash

 

The Senate GOP tax bill won’t produce enough economic growth to fully pay for its tax cuts, the Joint Committee on Taxation (JCT) said in an analysis released Thursday.

The bill’s macroeconomic effects would reduce the deficit by $408 billion over 10 years, but the bill overall would still cost about $1 trillion, the JCT said.

The JCT had earlier estimated that the bill would lose $1.4 trillion in federal revenue before accounting for economic growth.

{mosads}The report comes as Senate Republicans are debating the inclusion of a “trigger” to scale back some of the bill’s tax cuts in the event that it doesn’t produce as much economic growth as expected.

Some Republican lawmakers have said they think the bill will produce enough economic growth to pay for itself. But deficit hawks such as Sens. Bob Corker (R-Tenn.), Jeff Flake (R-Ariz.) and James Lankford (R-Okla.) have been concerned about the bill’s impact on the debt.

The JCT estimated that the bill would increase gross domestic product by 0.8 percent on average over 10 years, compared to the Congressional Budget Office’s baseline.

The economic growth would reduce the bill’s revenue losses by $458 billion over 10 years. But that would be partially offset by a $51 billion increase in the cost of federal debt service, since the bill’s additions to the debt would lead to higher interest rates, according to the JCT.

Economists at the conservative-leaning Tax Foundation, which produces its own analyses of tax bills, said that they thought the JCT likely underestimated the economic growth created by the bill.

“The range of estimates from JCT includes several important assumptions that limit its growth results, particularly, assumptions regarding the Federal Reserve’s response to potential inflation and the United States being a closed economy,” said Tax Foundation economists Nicole Kaeding and Gavin Ekins.

A spokeswoman for Senate Finance Committee Chairman Orrin Hatch (R-Utah) was critical of the analysis because it was done of the version of the bill that passed the Committee and the bill will continue to be amended.

An analysis of tax provisions that do not reflect the final outcome of the evolving Senate tax bill — which will be amended on the floor this week — is incomplete,” the spokeswoman, Julia Lawless, said.

“The nonpartisan Congressional Budget Office (CBO) has said it was ‘not practicable’ to issue a macro view of the Senate bill at this time. And given that leading economists have projected the Senate tax bill will deliver significantly higher amounts of economic growth and federal revenue than the Joint Committee on Taxation (JCT) reports, the findings of JCT are curious and deserve further scrutiny.”

Sen. Ron Wyden (D-Ore.), the top Democrat on the Finance Committee, said the analysis contradicts claims made by congressional Republicans and the Trump administration.

“This score that I’ve just gotten ends the fantasy about magical growth and claims that tax cuts pay for themselves,” he said.

– This report was updated at 4:30 p.m.

Tags Bob Corker James Lankford Jeff Flake Joint Committee on Taxation Orrin Hatch Ron Wyden Tax bill

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