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- Republicans revealed the final version of the Tax Cuts and Jobs Act on Friday.
- Analysis by the right-leaning Tax Foundation estimates that the bill will grow the US economy by 1.7% over the long term and add $448 billion to the federal deficit.
- While the report found the bill to be “pro-growth,” it saw it falling short of Republican promises on growth and the deficit.
Congress is expected to pass the final version of the gigantic Republican tax overhaul by Wednesday, concluding a mad dash to get the bill on President Donald Trump’s desk before Christmas.
While the bill was only released Friday, leaving little time to break down the impact of the legislation, the conservative-leaning Tax Foundation on Monday did release its initial analysis of the bill’s impact on economic growth.
According to the Tax Foundation’s model, which is generally considered aggressive in its assumptions about economic growth, the conference committee’s version of the Tax Cuts and Jobs Act would boost gross domestic product by 1.7% over the long run. In the short term, the model found that the bill would boost the GDP growth rate to 2.45% in 2018 from the current projection of 2.01%.
While the economic boost estimated by the Tax Foundation’s model is significant, it still falls well short of a series of Republican promises.
Based on analyses by Trump administration economists and other Republican economists, GOP leaders said the tax bill could increase GDP by 3% to 5% over a 10-year period. The Tax Foundation also found that annual GDP growth would fall short of Trump’s 3% target in each of the next 10 years even after accounting for growth from the tax bill.
Nicole Kaeding, one of the economists at the Tax Foundation, tweeted after the release of the report that the growth projection was negatively affected by adjustments in the final bill that would make certain tax benefits for businesses less generous than in previous iteration of the bill, such as changes to how businesses can expense structures.
The model estimated that the increased economic growth would boost federal revenue by roughly $600 billion over a 10-year window, meaning the plan would still substantially increase the federal deficit.
“Overall, the plan would decrease federal revenues by $1.47 trillion on a static basis and by $448 billion on a dynamic basis, due to the aforementioned $600 billion in dynamic revenue reflow, expiration of multiple provisions, and the addition of the revenue generated from the functional repeal of the individual mandate,” the report said.
So while the Tax Foundation finds the bill to be “pro-growth,” it still satisfies neither the economic boost nor the debt promises made by the Trump administration and Republicans.