- Three new analyses of the Senate’s Tax Cuts and Jobs Act all delivered bad news for Republican leaders.
- The Tax Policy Center found that more than 50% of Americans would see a tax increase in 2027 under the bill.
- Only one out of 42 economists surveyed by the University of Chicago’s Booth School of Business said the bill would increase economic growth substantially.
- The Penn-Wharton Budget Model found that the bill would blow a hole in the federal deficit.
While Congress is on a weeklong Thanksgiving break, the breakneck speed of the Republican push to overhaul the US tax code has taken a bill close to passing in the Senate.
The latest version of the chamber’s Tax Cuts and Jobs Act passed the Senate Finance Committee last Thursday, and Senate Majority Leader Mitch McConnell has said he wants to bring the bill for a full Senate vote when lawmakers return from the recess.
But on Tuesday, Republicans were hit with something of a triple whammy: Three different groups offered critical analyses of the bill’s potentially negative effects on the federal budget, Americans’ taxes, and the broader US economy. While the Senate is still expected to make changes to the legislation, each of the new studies shows that the Senate’s bill has some significant underlying problems.
Tax Policy Center says it would raise taxes on half of Americans
Perhaps the most damning of the new reports came from the Urban Institute and Brookings Institution’s Tax Policy Center.
The nonpartisan group’s analysis of the legislation found that while all income groups would get a tax cut from the bill in the short term and long term, many Americans would see their taxes increase. From the report:
- In 2019: Americans, on average, would see their taxes cut by $US1,300, an increase in take-home pay of 1.7%. Americans in the middle quintile of income earners – $US50,000 to $US87,000 a year – would get a tax cut of $US850, on average, and receive 18.4% of the tax cuts’ benefits. People in the top 1% of incomes, more than $US750,000 a year, would see a cut of $US34,130, on average, and receive 17.6% of the bill’s total benefit.
- In 2027: The bill’s proposed sunset of the individual tax cuts, combined with other changes to the code, means benefits would be substantially less for the middle class. The average cut for all Americans would be just $US300, and 50.3% of American households would actually see their taxes increase by this point. Those in the middle quintile of earners would see a tax cut of just $US50, on average, and 65.6% of these people would see their taxes go up. People in the top 1% of income earners, however, would still get a tax cut of $US32,510, on average, and would receive 61.8% of the total tax benefits from the plan. Just 16.8% of people in the top 1% would see a tax increase.
Economists do not think the bill will grow the economy
Trump and Republicans have argued that the cuts in the plan would stimulate economic growth and even help “pay for” its new spending. Most economists aren’t buying the rosy projections.
But according to the IGM Forum survey of 42 academic economists by the University of Chicago’s Booth School of Business, only one economist agreed that “US GDP will be substantially higher a decade from now” than under the current baseline. In fact, 52% disagreed or strongly disagreed that the bill would lead to significant economic growth, and 36% were uncertain.
And when asked whether the “US debt-to-GDP ratio will be substantially higher” in 10 years under the bill compared with current law, 88% of the economists agreed or strongly agreed, 2% were uncertain, and the rest abstained.
Penn-Wharton budget model says the bill would blow a hole in the deficit
The final rough analysis for the legislation came from a new report from the University of Pennsylvania, using its Penn-Wharton Budget Model to assess the budgetary effects of the bill.
While Trump administration officials say the legislation would pay for itself, some Senate Republicans have been hesitant to support the bill over concerns that it would cause a massive increase in the federal debt.
The Penn model found that the bill would increase the federal deficit by $US1.327 trillion over the first 10 years after it becomes law (not including debt-service costs). Even when factoring in the economic boost from the tax cuts, according to the report, the bill would still add $US1.271 trillion in debt.
Either way, the model concludes that much like the House version of the bill, the Senate bill would not come close to paying for itself.
Business Insider Emails & Alerts
Site highlights each day to your inbox.