Senate Tax Plan Won't Pay for Itself, Congressional Analysis Says-- 3rd Update
Senate Republicans' tax plan would expand the economy but wouldn't meet the party's promise that it will pay for itself through faster economic growth, according to an official congressional analysis released on Thursday.
The bill, which includes $1.4 trillion in net tax cuts over a decade, would make up for just $458 billion of that, or less than one-third of its cost, through economic growth, the analysis said. The bill also would increase federal interest costs by about $51 billion over a decade.
That means the net cost of the bill would be about $1 trillion over a decade, the report said.
Democrats said the JCT estimate undercuts the entire Republican argument for their tax bill.
"It is the total opposite of what the Senate sponsors and the Trump administration have been claiming for months," said Sen. Ron Wyden (D., Ore.) "The independent referee has essentially contradicted the unicorn, magic growth fairy analyses."
The so-called dynamic scoring estimate comes from the Joint Committee on Taxation, the nonpartisan arm of Congress tasked with analyzing tax policies. When Republicans took full control of Congress, they pressed the committee to account for economic growth when estimating tax policies. However, the House of Representatives passed its tax bill without such an analysis; Thursday's report comes hours before a Senate vote.
Republican Sen. John Cornyn of Texas said he thought the JCT models didn't assume enough influx of investment into the country, though he also noted that the report shows there would be an economic gain.
"We can quibble about how much growth you're going to get," he said.
Sen. James Lankford (R., Okla.) said he wanted to understand more about the JCT's estimates.
"I was a little amazed that they would think that our growth is less than 1% in 10 years," he said. "That's a little surprising. I've not seen anything that low as a growth estimate."
According to the report, the bill would increase gross domestic product by 0.8% over a decade compared with baseline estimates. It would increase investment and employment, but the gains would shrink as the bill's provisions expire. That growth estimate is short of what Republicans have claimed.
The analysis may have contributed to a last-minute change in the bill. Sen. Bob Corker (R., Tenn.) has "latched onto" the analysis, said Mr. Cornyn.
Republicans may make their 20% corporate tax rate temporary as a result, baking automatic increases into the bill.
Julia Lawless, a Senate Finance Committee spokeswoman, said the findings were "curious and deserve further scrutiny." She called the estimate "incomplete" because the bill is still changing. Republicans haven't released those final changes as of Thursday afternoon, and they don't plan to wait for an updated dynamic score before voting.
The tax bill, expected to head for a vote as soon as Thursday night in the Senate, cuts the corporate tax rate to 20% from 35%, accelerates write-offs for business investments temporarily and lowers taxes on pass-through businesses such as partnerships and S corporations. It also cuts individual taxes for most households, though those breaks would expire after 2025.
Republicans, including Treasury Secretary Steven Mnuchin, have argued the tax bill's business tax cuts will spur much faster economic growth and generate enough new tax revenue to cover their costs. But independent analyses haven't backed that up, and the Treasury hasn't produced its own estimates.
The Joint Committee on Taxation report is likely to bolster Republicans' attempts to add a "trigger" to the tax bill that would increase taxes automatically if economic or revenue targets aren't hit. Such a provision is designed to placate lawmakers such as Mr. Corker, Jeff Flake (R., Ariz.) and James Lankford (R., Okla.)
Republicans are still trying to determine how that trigger would work and how it could fit inside the Senate's parliamentary restrictions.
Republicans have touted the bill's changes to international tax rules and corporate rate reduction as incentives for domestic investment. The JCT found that investment would increase because of those policy shifts and because of the business tax cuts.
In the long run, however, the Senate GOP bill's effects would fade away, the committee said.
"Combined with reduced labor supply due to increasing tax rates on labor, the upward pressure on interest rates is projected to partially or wholly offset investments incentives by the end of the third decade," the report said.
Write to Richard Rubin at firstname.lastname@example.org
(END) Dow Jones Newswires
November 30, 2017 18:43 ET (23:43 GMT)