The US Senate version of the tax overhaul plan would pay for itself over 10 years, boosting growth and generating $1.8 trillion in additional revenues, the Treasury Department said Monday. The Republican plan is expected to generate GDP growth of about 2.9 percent over the next decade, 0.7 percentage points higher than the current forecast, which will bring in more revenue to the government's coffers and offset the deficit increase caused by lower taxes, according to a Treasury analysis.
Republicans in the House and Senate are working to come up with a final unified version of the reform that President Donald Trump can sign before the end of the year. Both versions call for slashing taxes for corporations and business partnerships while eliminating many deductions for individuals. "The Administration has been focused on tax reform and broader economic policies to stimulate growth, which will generate significant long-term revenue for the government," US Treasury Secretary Steven T. Mnuchin said in a statement.
Many economists doubt large tax cuts can pay for themselves, especially in an economy with not much more room to grow. Other estimates have forecast significantly smaller increases in economic growth as a result of the tax overhaul. The non-partisan Joint Committee on Taxation estimates the Senate plan could add as much as a $1 trillion to the deficit by 2027. But according to the Treasury's analysis, the increased revenues from higher growth should exceed those lost to tax cuts by about $300 billion.
"These increased receipts are primarily collected in the last five years," the Treasury said in a statement. "We acknowledge that some economists predict different growth rates," it added.