House Tax Plan Won’t Generate Enough Growth to Pay for Itself: TPC Analysis

House Tax Plan Won’t Generate Enough Growth to Pay for Itself: TPC Analysis


A new report released Monday that finds that the House-passed version of the tax bill would boost economic growth only modestly over the next 20 years — far less than the Trump administration has claimed and not nearly enough for the cuts to pay for themselves.

The Tax Policy Center estimates that the bill would increase GDP by 0.6 percent in 2018 as higher after-tax incomes lead Americans to spend more. The bill would also lead some people, especially lower-earning spouses, to join the labor force or work longer hours. And the business tax changes would encourage greater savings and investment as draw in foreign capital.

But those economic effects would fade over time so that output would only climb by 0.3 percent in 2027 and 0.2 percent in 2037. Trillions of dollars in additional government debt resulting from the tax cuts would result in higher interest rates that stifle private investment, the report says: “Over time, investment would fall below levels that would occur without the tax bill.”

For the 10 years through 2027, the Tax Policy Center estimates that added economic growth and greater after-tax incomes resulting from the tax changes would reduce the $1.436 trillion cost of the legislation by $169 billion. Including economic feedback effects and interest costs, federal debt would rise by $1.5 trillion over those 10 years.