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Treasury Sees Rosy Revenue Effects of GOP Tax Plans

Borrowing some nomenclature from the White House, Senate Minority Leader Charles E. Schumer, D-N.Y., dubbed the Treasury report "fake math." (Tom Williams/CQ Roll Call)
Borrowing some nomenclature from the White House, Senate Minority Leader Charles E. Schumer, D-N.Y., dubbed the Treasury report "fake math." (Tom Williams/CQ Roll Call)

The Treasury Department on Monday estimated the Senate Republican tax code overhaul would actually shrink annual deficits over 10 years, a sharp break from congressional revenue estimates showing the GOP tax plans could cost at least $1 trillion over a decade.

Treasury’s Office of Tax Policy released a one-page summary of its analysis of the Senate-passed legislation, which predicts the legislation would raise revenue by $300 billion over 10 years compared to current law.

That estimate assumes an ambitious 2.9 percent growth rate in inflation-adjusted gross domestic product over the next decade, stemming from the proposed tax cuts and a “combination of regulatory reform, infrastructure development and welfare reform,” the summary said.

Independent estimates have been less flattering.

The Joint Committee on Taxation, the official scorekeeper for tax legislation, predicted the Senate plan would lose $1 trillion in revenue over 10 years even on a “dynamic” basis, or factoring in economic growth.

Dynamic scores by outside groups have also pegged the total 10-year cost of the House and Senate bills at anywhere from $500 billion to $2.2 trillion, based on various factors including dynamic analysis, additional debt service costs and the probability of certain provisions being extended beyond their proposed sunset dates. Those include estimates by the nonpartisan Committee for a Responsible Federal Budget, the Penn Wharton Budget Model, the Urban-Brookings Tax Policy Center and Tax Foundation.

The final tax bill can lose up to $1.5 trillion in revenue over the next decade, a limit prescribed by the House and Senate’s adopted budget framework. But Republicans and the Trump administration promise the booming economic growth resulting from tax cuts will more than make up for the lost revenue.

Senate Majority Leader Mitch McConnell, R-Ky., has said the Senate plan would be a “revenue producer” in the end, though he and other Republicans have mostly not offered studies to back up that claim.

McConnell’s Democratic counterpart, Minority Leader Charles E. Schumer of New York, called the Treasury analysis “one page of fake math” in a statement released Monday.

The Treasury analysis said its projected 2.9 percent GDP growth could be attributed half to corporate tax cuts and half to other tax changes, including breaks for individuals and “pass-through” businesses. Both the House and Senate-passed tax bills would drop the corporate tax rate from the current 35 percent to 20 percent, though the Senate bill begins the rate cut in 2019 rather than 2018 under the House measure.

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