The think tank also estimated that the bill would boost wages by more than 3.1 percent over the long term, a helpful finding to Republicans.
“Lawmakers should be lauded for undertaking the first major overhaul of the U.S. tax code in over three decades,” said Tax Foundation President Scott Hodge. “Our extensive modeling shows that the House tax plan would not only simplify our complex tax code, but also raise living standards for all Americans.'
The analysis also contains bad news for Republicans, though. It concluded that the bill would amount to a $989 billion reduction in tax revenue over 10 years even after taking into account that it would accelerate economic growth. President Trump's advisers have said that the plan would pay for itself when its effects on the economy are taken into consideration. Several Republican senators have said they don't want to vote for a bill that would increase the federal deficit.
The Tax Foundation's model is meant to be similar to one used by Congress' own in-house tax experts. House Republicans have cited the group's results before.
Other outside analysts are unlikely to attribute as much economic growth to the Republican plan as the Tax Foundation did. Many tax modelers assume that tax cuts, if not offset by spending cuts, would slow private investment because the federal government would have to borrow to make up the difference, driving up interest rates and "crowding out" private-sector investment. The Tax Foundation assumes otherwise.
The model predicts that the GOP plan would increase economic growth because it would lower taxes on business investment and labor, leading to more investment and more work.
The analysis finds that, while the tax plan would boost the incomes of everyone, the top 1 percent would see the biggest tax cuts, with a 7.5 percent increase in after-tax incomes in 2018. Considering the effects the plan would have on paychecks, however, the story is different. In such a dynamic analysis, the bottom 90 percent would get after-tax income increases of between 4 percent and 5 percent by 2027. The top 1 percent would see only a 3.9 percent boost.