U.S. Treasury says tax reform will add $1.8 trillion in revenue
The U.S. Treasury's Office of Tax Policy has modeled the Senate Finance tax reform plan, using the assumption of approximately a 2.9 percent growth rate over 10 years in the administration's fiscal year 2018 budget, the Treasury said in a report.
Compared with the baseline scenario of a 2.2 percent growth rate per year, the report said the 0.7 percent increase in the annual growth rate comes from changes to corporate taxation, changes to pass-through taxation and individual tax reform, as well as from a combination of regulatory reform, infrastructure development, and welfare reform.
The report also argued that the additional economic growth would result in an increase in tax revenues during the 10-year period of approximately $1.8 trillion.
That means overall tax receipts would increase by $300 billion over a decade as tax cuts in the legislation is expected to cost $1.5 trillion, the Treasury said.
The Trump administration has long argued that tax reform would pay for itself with faster economic growth.
However, other analyses from independent think tanks and economists have found that the growth effects from tax reform would be relatively small and U.S. fiscal deficit would inevitably increase.
The Senate tax bill would cost about $1 trillion in 10 years even after accounting for faster economic growth, according to the Joint Committee on Taxation, a nonpartisan committee of U.S. Congress. ■