Koch-backed groups don’t want Republicans to wring their hands over the budgetary cost of tax reform. Instead, they want them to boldly cut taxes, and they produced an analysis Thursday making the case that tax cuts increase revenue.
Americans for Prosperity and Freedom Partners, two groups that back free-market policies, released an analysis of past U.S. tax cuts implemented under Presidents Kennedy, Reagan, and George W. Bush Thursday, concluding that those tax rate reductions led to faster economic growth and, accordingly, greater federal revenue.
“Critics of tax reform have argued for years that tax cuts will decrease federal revenues, favor the rich, or hurt the economy,” said, Mary Kate Hopkins, Americans for Prosperity’s deputy director of federal affairs. “Not only were they proven wrong, but revenue increased, the economy grew and all Americans reaped the benefits.”
House Speaker Paul Ryan and Ways and Means Committee Chairman Kevin Brady have maintained that tax reform must not add to long-term deficits. In part, they favor that standard to meet Senate procedural requirements for any permanent tax reform.
But the Koch-linked groups have clashed with Ryan and Brady over one measure included in their tax reform plan to raise revenue: border adjustment. They are now pressing the case that Congress can pass a tax cut without worrying about raising enough taxes to match current projected revenue.
The analysis notes that, when Kennedy, Reagan, and Bush cut taxes, revenue later grew.
The effect of tax rate reductions on federal revenue has been a matter of debate among economists.
Republicans in control of Congress have their own in-house experts to model the revenue effects of tax cuts and are planning on counting on faster economic growth in calculating whether their tax reform adds to the deficit. That method of accounting is known as “dynamic scoring.”
Past analyses from Congress’ Joint Committee on Taxation suggest that tax cuts pay for themselves, but only partly, and the amount of economic growth they generate depends on how they are structured.
Sen. Rob Portman, an Ohio Republican on the Senate Finance Committee, has suggested that a well-designed tax reform plan — a net tax cut — might generate enough economic growth to bring about $1 trillion in new revenue to federal coffers.
