The GOP tax plan got a triple whammy of brutal reviews
- 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 week-long Thanksgiving break, the breakneck speed of the Republican push to reform the US tax code has brought a bill to the edge of passage in the Senate.
The latest version of the chamber's Tax Cuts and Jobs Act (TCJA) passed the Senate Finance Committee on 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 three 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 TCJA has some significant underlying issues.
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 also see their taxes increase. Per the report:
- In 2019: The average tax cut for all Americans would be $1,300, an increase in take-home pay of 1.7%. Americans in the middle quintile of income earners - $50,000 to $87,000 a year - would get an average tax cut of $850 and receive 18.4% of the tax cuts' benefits. People in the top 1% of incomes, more than $750,000 a year, would see an average cut of $34,130 and receive 17.6% of the bill's total benefit.
- In 2027: Due to the TCJA's proposed sunset of the individual tax cuts, combined with other changes to the code, benefits would be substantially less for the middle class. The average cut for all Americans would be just $300, and 50.3% of American households would actually see their taxes increase by this point.
Those in the middle quintile of earners would get an average tax cut of just $50, and 65.6% of these people would see their taxes actually go up. People in the top 1% of income earners, however, would still get an average tax cut of $32,510 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 don't think the TCJA will grow the economy
Trump and Republicans have argued repeatedly 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 if the "US debt-to-GDP ratio will be substantially higher" in 10 years under the bill compared to current law, 88% of the economists agreed or strongly agreed, 2% were uncertain, and the rest abstained.
Penn-Wharton budget model says the TCJA will 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 potential budgetary effects of the bill.
While Trump administration officials claiming the TCJA 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.
According to the Penn model, the TCJA would increase the federal deficit by $1.327 trillion over the first 10 years after it becomes law (not including debt service costs). Even when factoring the economic boost from the tax cuts, according to the report, the bill would still add $1.271 trillion in debt.
Either way, the model shows that much like the House version of the bill, the Senate TCJA would not come close to paying for itself.