Tax Foundation touts House GOP plan as expanding economy

Tax Foundation touts House GOP plan as expanding economy
© Moriah Ratner

The House Republicans' tax-reform blueprint would increase the size of the economy in the long run by 9.1 percent and lead to an additional 1.7 million full-time equivalent jobs, an analysis released Tuesday by the conservative-leaning Tax Foundation found.

It said the wage rate would increase by 7.7 percent and capital investment would go up by 28.3 percent if the GOP tax plan became law.

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The House GOP tax plan, one of six parts of Speaker Paul RyanPaul Davis RyanAmash storm hits Capitol Hill Debate with Donald Trump? Just say no Ex-Trump adviser says GOP needs a better health-care message for 2020 MORE’s (Wis.) “Better Way” agenda, would lower the top individual tax rate to 33 percent and the corporate tax rate to 20 percent.

It would move the U.S. toward a consumption-based tax system, in part by allowing businesses to immediately write off the full costs of their capital investments. It also would eliminate a number of deductions and credits.

“The larger economy and higher wages are due chiefly to the significantly lower cost of capital under the proposal, which is due to the lower corporate income tax rate and the full expensing of capital investment,” wrote the Tax Foundation, which backs a simple, transparent and stable tax code.  

House Republicans aimed for their blueprint to be revenue-neutral after considering its macroeconomic effects.

The Tax Foundation estimated that the GOP plan would cost $2.4 trillion in its first decade when economic effects are not taken into account, but would only cost $191 billion in that time frame once economic growth is factored in. Because of the increased size of the economy, wages would go up and the income and payroll tax bases would get bigger, the group said.

The blueprint would cost less after the first decade because much of the initial revenue losses would be one-time, the Tax Foundation said.

All income groups would see tax cuts under the blueprint, the group said.

When economic effects are not considered, those in the bottom 80 percent of income would see increases in their after-tax income of 0.2 percent to 0.5 percent, and taxpayers in the top 1 percent of income would see their after-tax incomes increase by 5.3 percent.

When economic effects are taken into account, everyone would see their after-tax incomes increase by at least 8.4 percent, and those in the top 1 percent would see a 13 percent boost, according to the report.

House Ways and Means Committee Chairman Kevin BradyKevin Patrick BradyMicrosoft, other business leaders head to Capitol Hill in support of carbon tax House to vote on retirement bill next week House chairman issues subpoenas for Trump's tax returns MORE (R-Texas) said that "the Tax Foundation's analysis proves that our blueprint will deliver a tax code built for growth and will improve the lives of all Americans." 

He added that the committee will ensure that legislation based on the blueprint will be revenue neutral after taking economic effects into account.

The Tax Foundation’s analysis of the House GOP blueprint differs from the analysis released last week by the liberal Citizens for Tax Justice (CTJ).

CTJ found that the plan would cost $4 trillion over a decade. The group also said that only those in the top 5 percent of income would be better off under the blueprint once the spending cuts needed to offset the tax cuts are considered.

Congressional Democrats have expressed concerns about “dynamic” revenue analyses that consider economic effects.

“Dynamic scoring has proven to be extremely unreliable and is used by Republicans to cover up their fiscal irresponsibility,” House Ways and Means Committee ranking member Sandy Levin (D-Mich.) said after the blueprint’s release. 

This story was updated at 2:00 p.m.