The U.S. Treasury Department’s tax plan analysis was long promised to be an in-depth and transparent look at the Republican tax reform plan being pushed through Congress, but many economists and politicians are highly critical of the one-page, 470-word document that the department released, calling it more a political statement rather than any sort of serious economic analysis.
The Treasury Department called it an “analysis of growth and revenue estimates,” but there was pushback due to the short length of the document, as well as the lack of support for the numbers reported both in the paper and by the department more broadly.
“We acknowledge that some economists predict different growth rates,” the Treasury Department wrote in its document, but that belies the massive gulf between the Trump administration’s projected numbers and some of the figures being reported by analysts.
For instance, the Republican tax reform plan would see major tax cuts going to corporations and wealthier individuals, while the middle class will receive more modest reductions. The result would be a $1.4-trillion addition to the deficit over 10 years due to the massive reduction in revenue. But the administration claims that the economic growth spurred on by the new tax regulations would result in an increase in revenue by $300.0 billion.
But other studies have shown that the plan would, far from increasing revenue, leave the country with an additional $1.0 trillion added to the federal deficit.
The statement also promises the three-percent economic growth rate that the White House has long touted as their goal, even though the three percent projection was made on the assumption that the Republican tax reform plan would repeal the alternative minimum tax and slash the corporate tax rate to 15%, neither of which is part of the Senate bill as it is currently constructed.
Congress is in a hurry to see this legislation through, as President Donald Trump has spent a year in office without a single major legislative victory, hoping that the tax plan can be his crowning achievement in the first year of his presidency. The bill, while passed, is currently back in Congress and not yet finalized.
An analysis released by the Congressional Joint Committee on Taxation found that the Senate tax bill would generate economic growth to the tune of about $458.0 billion over a decade. Accounting for interest, that puts the figure at $407.0 billion, leaving the U.S. with a $1.0 trillion hole.
For its part, the administration criticized the analysis, claiming that the bill was still being changed and that the study was “incomplete.”
The result is that we have not only politicians arguing over where the numbers will end up, but also offering two widely different versions of reality. Which one is true and which one is false will result in the U.S. either gaining a massive boost to the economy or adding over $1.0 trillion to an already booming deficit.
“Treasury’s One-Page Report: Trump’s Plans Pay for Senate Tax Cut,” Bloomberg, December 11, 2017.