Budgeting Foreign Tax

U.S Tax Bill To Add $448bn To Federal Deficit – Tax Foundation

The final Republican tax bill set for a House vote today has been projected to add $448 billion to federal deficits over 10 years with economic growth factored in.

The analysis was made by the right-of-center Tax Foundation yesterday.

A news report by Bloomberg.com the estimate is far lower than the $1 trillion deficit increases Congress’s official scorekeeper estimated for the House and Senate bills after accounting for economic growth.

A Joint Committee on Taxation macroeconomic analysis of the final bill has not yet been released.

The Tax Foundation estimates that the legislation would decrease federal revenues by $1.47 trillion before new revenue from increased economic growth is taken into account.

According to the Group, the extra revenue would result from an increase in Gross Domestic Product of 1.7 percent over 10 years, according to the estimate, which does not model the effects of eliminating the Obamacare individual mandate.

The report actually says that the tax bill “would increase GDP by 2.86 percent” over current projections, but a spokesman for the Tax Foundation said today that the lower number represented the policy group’s projection.

The new estimate could allow Republicans to argue that the tax bill would pay for itself. That’s because the revenue baseline that scorekeepers, including the Tax Foundation, use assumes that Congress would let several existing tax breaks that are already set to expire go off the books — a so-called current-law baseline.

But Congress tends to extend such expiring breaks regularly. So, using a more realistic “current-policy” baseline — that is, assuming that $460 billion in expiring tax breaks would be renewed — would make the bill revenue-neutral against a lower baseline number.

The current-policy argument might create a new issue, however: The bill’s individual tax cuts are set to expire after 2025, but Republicans have said that they’ll be so popular, they’ll be extended by a future Congress. If that’s the “policy,” then the effect of extending the tax cuts might have to factor into a current-policy assumption as well.

The Tax Foundation says making all the bill’s tax cuts permanent would raise its cost to $2.7 trillion over 10 years, or $1.4 trillion with economic growth factored in. That sum can’t be erased by changing the revenue-baseline assumptions.

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