On Saturday, the U.S. Senate passed the 479-page Senate Tax Cuts and Jobs Act, a bill that would mark the largest tax overhaul in 31 years. The bill’s backers have pitched it as a trimming of the middle-class and corporate tax burden, arguing that the cuts will pay for themselves in economic growth despite the nonpartisan Joint Committee on Taxation’s findings to the contrary. In the wake of the bill’s passage, many media outlets—from the New York Times to the Wall Street Journal and the Sunday morning political news shows—have turned to the Penn Wharton Budget Model, a nonpartisan initiative that provides research-based analyses of public policy’s fiscal impact, to test that claim.The Penn Wharton Budget Model analysis projects that the Senate Tax Cuts and Jobs Act will reduce tax revenues by roughly $1.3 to $1.5 trillion by 2027, with the economy growing 0.8 percent larger over these first 10 years relative to current policy. The boost to GDP that the tax cuts produce will offset about $275 billion of their more than $1 trillion cost, the model projects, and the GDP boost will continue to diminish over time. By 2040, GDP will be between 0.2 percent to 1.2 percent larger relative to no tax changes, with revenues falling between $1.1 trillion and $2.1 trillion. Put simply, the model’s analysis finds that not only will the Senate tax plan not pay for itself, but it will add more than $1 trillion to the nation’s deficit in the next ten years.
This analysis uses the November 15 amended version of the bill, not the final version, which received several last-minute changes just before the Senate vote. Visit the Penn Wharton Budget Model website for updates as new information becomes available (including this examination of the Child Tax Credit). For now, here’s a sampling of articles which highlight the Penn Wharton Budget Model analysis:
“Senate’s Official Scorekeeper Says the Republican Tax Plan Would Add $1 Trillion to the Deficit” (The New York Times – Updated December 1, 2017)
“Republicans are Looking for Proof their Tax Cuts will Pay for Themselves. They Won’t Find It.” (The Washington Post – December 1, 2017)
“How Households Win and Lose in the House Tax Bill” (The Wall Street Journal – November 30, 2017)
“Don’t Count on Substantial Economic Growth from Trump Tax Bill” (Forbes – November 28, 2017)
“Tax Talks Advance Without An Analysis of Economic Impact” (The Wall Street Journal – November 17, 2017)
“Republicans are Still Making a Huge Claim About the Tax Bill that Every Independent Analysis Rejects” (Business Insider – December 4, 2017)
To learn more about the Penn Wharton Budget Model, see “Inside the Penn Wharton Budget Model,” from the Fall 2016 issue of Wharton Magazine.