The Senate tax bill introduced Thursday would boost the economy, creating 925,000 new jobs and raising wages by 2.9 percent over 10 years, according to a new analysis released Thursday by the Tax Foundation.
The think tank also calculated that the bill would be a $1.78 trillion net tax cut over 10 years, even greater than the $1.5 trillion estimated by Congress' own tax experts.
The Tax Foundation's analysis contains even more good news for President Trump and Republican leaders hoping to push tax reform through this year. After taking into account the faster economic growth spurred by the plan, the group finds that the bill would increase the deficit by only $516 billion over a decade.
That result could reassure Republicans concerned that the tax cuts could add to the debt. Sen. Bob Corker of Tennessee, for example, has said that he won't vote for a plan that increases the debt. In making that decision, though, he might consider outside analyses showing that the plan creates enough economic growth to offset revenue lost from tax cuts, he has said.
Corker, a member of the Senate Budget Committee, struck the deal that limited the tax cut to $1.5 trillion. The logic behind that number was that he could imagine a pro-growth tax reform generating $1 trillion, mostly making up the difference. He would be willing to overlook the $500 billion remainder on the basis that the government might not ever collect those revenues in the absence of tax reform because many temporary tax breaks set to expire likely would be renewed by Congress anyway.
The Tax Foundation analysis finds that the Senate plan would encourage economic growth by lowering tax rates on investment and labor, which would give incentive to business expansion and work.
The added growth would be the equivalent of roughly 0.36 percentage points to each year's gross domestic product growth rate. For instance, rather than 1.9 percent long-term growth, the U.S. might see 2.26 percent growth under the plan.
The Tax Foundation estimates that the bill would provide tax cuts to all income groups in the first year, boosting after-tax incomes by 2.5 percent on average. The top 1 percent of earners would see the biggest income gains, of 7.5 percent.
Those gains would be much bigger after the economy lifts off. By 2027, average after-tax incomes would rise by 4.4 percent, with middle-income earners seeing the largest paycheck growth.