Conservative tax group: Net effect of reform plan is deficit rising $989B

The conservative Tax Foundation estimates that GOP tax reform plans would raise the deficit by $1.98 trillion over a decade — significantly more than House estimates — but that increased growth would bring back about a trillion dollars in revenue.

Budget rules approved last week allow the Republican proposal to grow the deficit by $1.5 trillion over 10 years, and the Joint Committee on Taxation estimates the reform bill unveiled Thursday would stay below that limit.

The Tax Foundation estimates hundreds of millions more in lost tax revenue, but said Friday that the bill’s effects on the economy would result in a net loss of $989 billion.

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The foundation says the legislation would lead to 3.9 percent higher growth in the long run and 3.1 percent higher wages.

Key Senators such as Bob Corker (R-Tenn.) have said they would not vote for a plan that raised the deficit at all, and scoffed at claims from Trump administration officials such as Treasury Secretary Steven Mnuchin that economic growth would completely wipe out the tax-related deficit.

The foundation also found that, before growth effects are taken into account, the top 1 percent of earners would get 3.5 times the proportion of tax benefits as everyone else. 

In 2027, it found, all taxpayers would see a 0.9 percent increase in their post-tax income, while the top 1 percent of earners would see a 3.3 percent increase in their already-larger after-tax income.

That figure, however, did not take economic growth into account, which the foundation estimates would boost post-tax income by 4.4 percent, but only 3.9 percent for the wealthiest. That model assumes that labor would accrue 70 percent of the benefit from corporate tax breaks, a controversial assumption that other economists have called into question.