---

---

---

For the bottom line see:

David Sirota and Josh Keefe.  "Donald Trump And GOP Leaders Could Be Enriched By Last Minute Tax Break Inserted Into Final Bill."  International Business Times, Dec. 15, 2017.

---

Committee for a Responsible Federal Budget
December 18, 2017
http://www.crfb.org/blogs/final-tax-bill-could-end-costing-22-trillion

Final Tax Bill Could End Up Costing $2.2 Trillion

The final conference committee agreement of the Tax Cuts and Jobs Act (TCJA) would cost $1.46 trillion under conventional scoring and over $1 trillion on a dynamic basis over ten years, leading debt to rise to between 95 percent and 98 percent of Gross Domestic Product (GDP) by 2027 (compared to 91 percent under current law). However, the bill also includes a number of expirations and long-delayed tax hikes meant to reduce the official cost of the bill. These expirations and delays hide $570 billion to $725 billion of potential further costs, which could ultimately increase the cost of the bill to $2.0 trillion to $2.2 trillion (before interest) on a conventional basis or roughly $1.5 trillion to $1.7 trillion on a dynamic basis over a decade. As a result, debt would rise to between 98 percent and 100 percent of GDP by 2027.

Ignoring the expirations in this bill is particularly disingenuous given the claim that using a “current policy baseline” reduces the bill’s costs. The (flawed) idea is that the bill should be compared to a current policy baseline that counts expired and expiring provisions as if they are continued permanently. (For more on this, see Current Policy Gimmick Would Add Half-Trillion to Debt). Using such a construct does not make sense if cost of continuing future expirations contained in the bill are not included in the initial cost estimate. Policymakers are effectively claiming $450 billion of current policy savings while ignoring over $700 billion of current policy costs.

This latest estimate updates our tally of the gimmicks from a previous version of the bill. The changes made in conference include both tax increases and decreases that mostly offset each other, with a net increase in the ten-year cost of $9 billion (compared to the Senate bill). With these changes, the bill now has a total cost of $1.46 trillion, or roughly $1.77 trillion with interest. While there is no new dynamic score of the bill, assuming it continues to produce very roughly $400 billion of dynamic feedback would reduce that cost to about $1.05 trillion, or roughly $1.30 trillion with interest.

However, this cost does not account for as much as $725 billion of potential gimmicks that the conferenced bill contains.

In the earlier version passed by the Senate, we identified $585 billion of arbitrary sunsets and sunrises of certain provisions. Most significantly, nearly all of the individual income tax provisions would have expired after 2025. Additionally, the expensing provisions ("bonus depreciation") began to phase down starting in 2022, and a number of new tax increases appeared in 2026. Some provisions were set to expire even earlier, such as an expanded deduction for medical expenses and provisions for craft beer and paid leave – clearly setting the stage for future extensions.

The conferenced bill adds to the Senate bill's gimmicks, which we explain here. Most significantly, it advances the start date of the bill's requirement for research expenses to be amortized, which nearly doubles the ten-year savings of the provision. Additionally, the bill tightens its limits on the business interest deduction four years in the future – a future tax hike that may not be allowed to ever occur. Other changes are smaller and move in both directions.

Adding these gimmicks to the cost of the bill would increase the total cost to $2.0 trillion to $2.2 trillion. Though the dynamic effect of making the bill permanent is unknown, we estimate a permanent bill would produce roughly $450 billion of feedback, leading to a dynamic cost of roughly $1.6 trillion to $1.7 trillion. With interest, these costs would rise to $2.4 trillion to $2.5 trillion, or $1.9 trillion to $2 trillion with dynamic effects included, over a decade.

True Cost of Conference Bill

Policy    Ten-Year Cost
TCJA as reported by the conference committee    $1.46 trillion
Sunsetting individual tax provisions after 2025    $315 billion
Amortizing Research & Experimentation (R&E) expenses after 2021    $120 billion
Phasing out full expensing after 2022    $0 to 80 billion†
Making business interest deduction more strict after 2021    $0 to $75 billion†
Making foreign tax provisions more strict after 2025    $50 billion
Sunsetting more generous medical expense deduction after 2018    $45 billion
Sunsetting credit for employers who offer paid leave after 2019    $30 billion
Sunsetting craft beverage tax reforms    $10 billion
Conventional "Real" Cost    $2.0-$2.2 trillion
Potential Dynamic Feedback Effects    -$450 billion*
Dynamic "Real Cost"    $1.6-$1.7 trillion
      
True Cost with Interest    $2.4-2.5 trillion
True Cost with Interest and Dynamic Effects    $1.9-2.0 trillion
Source: CRFB calculations based on Joint Committee on Taxation.
†High end of the cost assumes these late-stage tax increases are not allowed to take effect.

As is, the bill would cause debt to increase from 77 percent of GDP this year to 95 percent or 98 percent of GDP by 2027, depending on whether dynamic effects are included, as compared to 91 percent projected under current law. If expiring provisions are extended and late-stage tax hikes avoided, debt could reach as high as 98 percent or 100 percent of GDP by 2027. In other words, the national debt could exceed the size of the economy.

---

The Concord Coalition
December 18, 2017

Rushed Tax Bill: Gimmicks, More Debt and Flawed Economics 

WASHINGTON -- The tax legislation produced by congressional negotiators and scheduled to be voted on this week remains as fiscally irresponsible as the original House and Senate bills, according to The Concord Coalition. This latest bill is based on flawed economics, poor tax policy and a troubling legislative process that has allowed little time for careful analysis.

“This bill is a particularly distasteful example of legislative sausage-making,” said Concord Coalition Executive Director Robert L. Bixby. “Its disingenuous combination of gimmicks and debt will not deliver the promised economic benefits, and the rushed, secretive process that produced this plan, with its many special-interest provisions, is bound to produce unwelcome surprises.”

The federal debt is already quite high by historical standards and projected under current law to increase by $10 trillion over the next decade. Instead of helping to address this problem, the tax bill would make it worse by adding more than $1 trillion in new borrowing. Moreover, gimmicks in the bill, such as “sunsets” never intended to take effect, are hiding its true cost.

The decision to enact a large deficit-financed tax cut at this time is very troublesome from a fiscal standpoint because the revenue loss would come just as the health care and retirement costs of retiring baby boomers are putting increasing pressure on the federal budget. Many lawmakers supporting the tax cuts are also looking for ways to increase spending on defense, border security and disaster relief.

“This is not the time for a big tax cut,” Bixby said. “The economy does not currently need fiscal stimulus; unemployment is low, corporate profits are high and the Federal Reserve is raising interest rates. At best the legislation could have some small short-term impact on the economy but even that is open to question. In the longer term, it does little to improve growth.”

Bixby added: “Tax cuts don’t pay for themselves -- even with generous assumptions about their possible impact on economic growth. Eventually there will need to be tax increases or spending cuts to pay for this legislation. The bill leaves unanswered how that would be done, who would pay and how that would affect the economy.”

There are a number of other problems with the legislation from a tax-policy perspective. Some provisions would disappear in later years, for example. This makes no sense, particularly if the provisions are as beneficial as their supporters claim.

The Concord Coalition has long called for tax reform that would substantially broaden the tax base by reducing or eliminating many “tax expenditures” -- provisions that reduce taxes for certain individuals and businesses. The broader tax base would enable Congress to lower rates and -- ideally -- reduce deficits as well, while making the code more economically efficient.

But the current legislation does not provide enough base-broadening relative to the planned rate cuts. In fact, the legislation creates new complexity in the tax code.

Congressional leaders and supporters of the proposed law should also be ashamed of the hurried and haphazard legislative process that produced it. There were no hearings or time for debate on the final product, or even thoughtful consideration. 

There was no serious attempt at bipartisanship, which is preferable with such far-reaching legislation. Consequently, the views of many Americans were never really considered by those who wrote the legislation.

A copy of this press release can be found here.      

The Concord Coalition is a nonpartisan, grassroots organization dedicated to fiscal responsibility. Since 1992, Concord has worked to educate the public about the causes and consequences of the federal deficit and debt, and to develop realistic solutions for sustainable budgets. For more fiscal news and analysis, visit concordcoalition.org and follow us on Twitter: @ConcordC