Treasury Department admits Senate tax plan won’t pay for itself
A “dynamic” score that just assumes growth.
Instead of a dynamic analysis showing that the tax plan would boost annual economic growth by the 0.7 percentage points they need,
they have an analysis claiming that if you passed that tax plan and did a bunch of other stuff you will get the growth (emphasis added):
[Office of Tax Policy] 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 taxation 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.
Two points on this.
One is that the budget proposal in question involved draconian spending cuts on a huge range of programs — everything from the Appalachian Regional Commission to Meals on Wheels to nutritional assistance for low-income pregnant women gets the axe. So if you want to “dynamically” score the growth benefits of this kind of thing, you also ought to dynamically update the distributional accounts.
Treasury is basically saying that if you pay for a corporate tax cut by taking money away from the needy, your GDP will grow.
At some margin, that’s probably true. The economic benefits of having pregnant women able to eat healthy food are not going to show up within a 10-year scoring window.
Providing meals to home-bound sick, elderly, and disabled people probably doesn’t generate any economic growth at all.
Your mileage may vary as to whether this is the right way to think about policy.
The second point is that even House Republicans
pronounced Trump’s budget proposal dead on arrival when he released it.
The budget resolution congressional Republicans passed looks totally different from Trump’s proposal, and the negotiations over appropriations
bills do not envision Trump’s proposals being enacted.
The administration’s analysis claims, basically, that
the tax cuts would pay for themselves if and only if they are paired with a bunch of other ideas congress already rejected.
https://www.vox.com/2017/12/11/16761...c-analysis-tax