Analysis from Trump's alma mater shows the GOP tax plan has a potentially massive maths problem

  • An analysis by The University of Pennsylvania’s Wharton School found that the GOP tax bill would reduce federal revenues on net by $US1.75 trillion in the first 10 years after it is theoretically passed.
  • The model also found that the bill would reduce revenues by $US4.931 trillion over the first 22 years.
  • This model highlights the political and procedural hurdles that the bill still faces.

The University of Pennsylvania’s Wharton School — which happens to be President Donald Trump’s alma mater — threw a bucket of cold water on the House Republican tax reform bill in an analysis released Monday.

The Penn-Wharton Budget Model showed that the Tax Cuts and Jobs Act (TCJA) would on net lower the federal government’s tax revenue by $US1.75 trillion over the first 10 years the bill would go into effect. Over a 22-year timeframe, the model estimated that the bill would lower tax revenues by almost $US4.4 trillion.

This is a big deal for political and procedural reasons.

Politically, a significant increase in the federal deficit is anathema to GOP ideology. Already, a handful of Republican lawmakers — particularly in the Senate — have expressed concerns about “blowing a hole” in the federal deficit.

And procedurally, the analysis suggests the House bill would likely not qualify under Senate rules for consideration under the process of budget reconciliation.

Reconciliation allows Senate Republicans to avoid a Democratic filibuster and attempt to pass any tax bill along a party-line vote, but also comes with certain stipulations. One key reconciliation rule is that any bill considered under the process can’t add to the deficit outside of the budget’s 10-year window.

Additionally, rules under the recently passed 2018 budget resolution only allow a bill being considered to add $US1.5 trillion in debt over the first 10 years.

The Penn analysis is based on a static model, meaning that it does not factor in potential economic growth from tax reform, which Republicans argue would help pay for the bill. A dynamic score from Tax Foundation found that the bill would still add roughly $US1 trillion to the deficit over the first 10 years and add to the deficit after the 10-year window, however.

Based on both the Penn and the Tax Foundation models, the House tax bill would need to be substantially altered to be considered in the Senate.

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