The Treasury Department released a one-page “analysis” of the Republican tax plan Monday finding that it could raise $300 billion in revenue if a higher rate of economic growth is assumed.
The release is the first public documentation for Treasury Secretary Steven Mnuchin’s claims that internal analysis shows that the tax cuts would spur enough new economic growth to pay for themselves. Democrats have challenged him to provide the analysis.
Monday’s analysis of the Senate-passed bill shows what would happen to federal revenue following the tax cuts if economic growth rose to 2.9 percent annually, rather than the 2.2 percent expected now. In that scenario, federal revenue would rise by $300 billion.
Here’s the math: The tax cut would amount to $1.5 trillion, according to Treasury’s career staff. That number accords with Congress’ official score of the bill. The next step: The higher economic growth rate would bring in $1.8 trillion in new revenue. The difference is $300 billion.
The 2.9 percent figure, though, is not an estimate of the tax bill’s effects on the economy. Instead, the Treasury simply took the growth figures from President Trump’s budget, which called not just for tax reform but also for new infrastructure investments and regulatory reform, most of which have not been enacted.
Yet Treasury staff do have the ability to model the macroeconomic effects of tax legislation, and did for proposals submitted by Presidents Bush and Obama, said Mark Mazur, the assistant secretary for tax policy at the Treasury under Obama who is now director of the Tax Policy Center. “It’s a little hard to say what the value of putting out a one-page document is — little more than a press release,” said Mazur.
In Monday’s document, the Treasury said it expects that half the 0.7 percentage point increase in annual growth would come from the reform of corporate taxes, including the lowering of the rate from 35 percent to 20 percent. The other half would come from the individual tax cuts and other planned actions by Trump.
Notably, estimates from Congress’ official scorekeeper have said the Senate tax bill would increase economic growth, but not by nearly enough for the tax cuts to pay for themselves. The bill would still lower revenue by $1 trillion over a decade even accounting for economic growth.
Outside analyses from think tanks have found the same result: The bill would boost growth, but not sufficiently to keep revenue level.
“We acknowledge that some economists predict different growth rates,” the Treasury said in its report.
Senate Democratic Leader Charles Schumer criticized the release Monday morning. “The latest Treasury ‘analysis’ is nothing more than one page of fake math,” the New Yorker said in a statement. “It’s clear the White House and Republicans are grasping at straws to prove the unprovable and garner votes for a bill that nearly every single independent analysis has concluded will blow up the deficit and generate almost no additional economic activity to make up for it.”
Maya MacGuineas, the president of the Committee for Responsible Federal Budget, said in a statement that Monday’s report “makes a mockery” of dynamic analysis of legislation.
“Rather than modeling the macroeconomic effects of the Senate tax bill, they simply take the same fantastical assumptions they made in the President’s budget and apply them to the tax bill,” she said.
