Department of the Treasury [PDF]
December 11, 2017

Analysis of Growth and Revenue Estimates Based on the U.S. Senate Committee on Finance Tax Reform Plan

Treasury’s Office of Tax Policy (OTP) has modeled the Senate Finance tax reform plan and overall has similar analysis to the Joint Committee on Taxation (JCT) on a static basis, with a score of approximately -$1.5 trillion on a current law basis and approximately -$1 trillion on a current policy basis.1 The difference between current law and current policy is that current law assumes existing provisions that are set to expire, such as bonus depreciation, do expire; while current policy assumes these are renewed, as has often been the case historically.

In addition to a static score, JCT calculated the increase in government tax receipts in the Senate Finance tax plan due to growth. They estimated $408 billion of additional tax revenue. Adding this $408 billion to the static score leads to a change in total projected receipts under JCT’s assumptions of approximately -$1 trillion on a current law basis.

OTP has modeled the revenue impact of higher growth effects, using the Administration projections of approximately a 2.9% real GDP growth rate over 10 years contained in the Administration’s Fiscal Year 2018 budget.2

OTP compared this 2.9% GDP growth scenario to a baseline of previous projections of 2.2% GDP growth. Treasury expects approximately half of this 0.7% increase in growth to come from changes to corporate taxation. We expect the other half to come from changes to pass-through taxation3 and individual tax reform, as well as from a combination of regulatory reform, infrastructure development, and welfare reform as proposed in the Administration’s Fiscal Year 2018 budget.

This 0.7% increase in the annual real growth rate results in an increase in tax revenues during the 10- year period of approximately $1.8 trillion. Adding this $1.8 trillion of incremental revenue to the static current law score of -$1.5 trillion results in total receipts over the 10-year window increasing by $300 billion. These increased receipts are primarily collected in the last five years, as full expensing creates growth in early years but results in a deferral of collection of taxes.

We acknowledge that some economists predict different growth rates. OTP projects that at approximately 0.35% of incremental annual GDP growth, Treasury tax receipts would generate approximately $1 trillion of incremental revenue.

Neither JCT nor Treasury has released a score showing increased tax receipts from the House plan, though we would not expect the results to be materially different.

1 OTP assumed similar levels of savings from the repeal of Obamacare’s individual mandate as JCT. All scores are on a 10- year time period.

2 More specifically, growth is 2.5% in 2018, 2.8% in 2019, and 3.0% thereafter, as developed by Treasury, OMB, and CEA for the President’s budget (FY2018).

3 Business tax receipts are estimated to be approximately half from corporations and half from pass-through businesses, although this has varied over time.

Committee for a Responsible Federal Budget

Treasury Department Report Assumes Instead of Analyzing

Today, the Treasury Department’s Office of Tax Policy issued a finding that claims the Senate Finance Committee's tax reform plan and other changes in the President’s budget would produce 2.9 percent sustained economic growth (compared to 2.2 percent under the Office of Management and Budget’s baseline and 1.8 percent under the Congressional Budget Office’s baseline), mostly as a result of the tax bill. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said the following:
 
This Treasury report makes a mockery of dynamic scoring and analysis, which is meant to help policymakers understand how their choices will affect the size of the economy.
 
In this analysis, the Treasury Department doesn’t estimate the tax bill will help get us to 2.9 percent sustained growth, it just assumes it. Rather than modeling the macroeconomic effects of the Senate tax bill, they simply take the same fantastical assumptions they made in the President’s budget and apply them to the tax bill.
 
Real dynamic scoring relies on sophisticated models to determine the effect of tax changes on labor, investment, interest rates, and income growth. Every true dynamic estimate of the House and Senate plans find they will have a much more modest effect on the economy than what the Treasury claims.
 
The Treasury Department appears to have drawn a favorable conclusion first and worked backwards from there, failing to even recognize the substantial differences between the Senate tax bill and the Administration’s tax plan at the time they first made these economic growth assumptions back in May.
 
Dynamic scoring can be an important tool to help policymakers understand and structure pro-growth policy changes; simply making up claims because we want them to be true will blunt this tool and damage the policymaking process.

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American Bridge 21st Century

Trump Administration tax "analysis" is built on a giant lie

Congress's Joint Committee on Taxation, joined by many other nonpartisan and even Republican experts, has estimated that the Trump-Republican tax plan could not pay for itself, and that it would significantly increase the U.S. budget deficit.  

Now, after suspicious delays and repeated promises from Treasury Secretary Steven Mnuchin, the Treasury Department has released a one-page "analysis" that concludes this deficit-busting tax proposal might pay for itself if not yet written plans for "regulatory reform, infrastructure development, and welfare reform" were also later implemented. 

"This is a joke​.​  ​I​t's like saying, 'I could fly if I could grow wings,​'​" said AmericanBridge Vice President Shripal Shah. "The fact that the Trump Administration had to doctor a study with fake calculations about major plans that don't even exist yet is a glaring admission of guilt. They know their tax cuts for the wealthy and corporations will come at a serious cost to the deficit, so they're lying to try and cover this up.  Credible analysis after analysis has made clear that this is a tax cut for the wealthy and corporations at the expense of everyone else."     

The Treasury Department's inspector general is currently investigating the delays behind release of this analysis, as well as whether political interference has occurred.
Democratic National Committee

Treasury Report On Republican Tax Plan Met With Ridicule

For months, Trump’s Treasury Department said it would release an economic analysis showing how the Republican tax plan would pay for itself. Secretary Mnuchin even repeatedly said that his department had over 100 people “working around the clock on running scenarios for us” and promised to release Treasury’s analysis in full. After initially failing to release any information, and facing an investigation from its inspector general,  today the Treasury put out a one pager that is, well, pretty pathetic. It’s clear the Republican tax plan won’t pay for itself.

The Treasury Department’s one pager uses rosy growth assumptions and accounts for policy changes that haven’t even been written yet.

Wall Street Journal: “The Treasury Department said Monday that the Republican economic agenda would generate enough economic growth to pay for the tax cuts being considered by Congress this week, using growth assumptions that far exceed the official congressional estimates.”

Wall Street Journal: “The other half would come from provisions in the tax bill, such as a lower tax rate for pass-through businesses, as well as policy changes that haven’t been written or taken effect yet, including easing regulations and ramping up infrastructure spending.”

 

Treasury’s one pager is not a substitute for the full economic analysis of the Republican tax plan that Mnuchin repeatedly promised.

Los Angeles Times: “The Treasury Department’s inspector general has launched an inquiry into whether the department hid an analysis of the Republican tax bill — or even did one at all. Treasury Secretary Steven T. Mnuchin has said economic growth stimulated by the bill’s large tax cuts would offset lost revenue and indicated his department would produce an analysis proving it.”

Tax Foundation's Scott Greenberg: “This is not an analysis of the economic effects of the Senate tax bill”

Economist David Kamin: “Treasury has released a one pager which will be used by tax cut advocates to claim that the tax cut pays for itself.  It's a joke and no substitute for the career staff running the full macro model they have to analyze effects.”

 

Rightfully so, the one pager was immediately met with ridicule.

MarketWatch: “After being hounded by Democrats, the Treasury Department on Monday finally released its analysis of the Republican tax plan — and finds that it doesn’t, as Treasury Secretary Steven Mnuchin has long contended, pay for itself.

Daily Beast’s Sam Stein: “This is the Treasury admitting that the tax bill doesn’t pay for itself. Requires other, major, subsequent legislation.”

CNN’s Phil Mattingly: “fascinated to hear the rationale for dropping something w/ so many massive holes in it...”

Politico’s Ben White: “This one page(!) report basically just says we are going to have nearly 3 percent growth for ten years and do a bunch of other stuff and so tax cuts pay for themselves. It will be ridiculed.”

Vox’s Matt Yglesias: “Treasury Department admits Senate tax plan won’t pay for itself.”

Washington Post’s Heather Long: “For months, Treasury Sec. Mnuchin has been promising a full analysis of the tax bill's economic effects. Today Treasury released a 1-page document that attributes ~half the higher growth to regulatory reform, welfare reform & infrastructure…”

Wall Street Journal’s Richard Rubin: “The nouns in this memo are doing a lot of work. Note, very carefully, what the Office of Tax Policy career staff is doing (arithmetic) vs. what ‘Treasury’ is doing (aggressive growth estimates).”

Center on Budget and Policy Priorities’ Jacob Leibenluft: “Pro-tip: if you hear anyone take this one-pager seriously as a ‘Treasury analysis that proves the tax plan pays for itself,’ it's proof-positive they are either: (a) really confused (b) not on the level (c) both.”

Former Council of Economic Advisers Chairman Austan Goolsbee: “Also emailed @Austan_Goolsbee for his thoughts on the Treasury one-pager. This was his full response: ‘Hahahahahahaha.’"

Former Council of Economic Advisers Chairman Jason Furman: “What an embarrassing joke. See my previous comments.”