Republican tax plan in confusion

The nonpartisan Joint Committee on Taxation ruled that the tax plan Republicans had hoped to move swiftly through the Senate would add $1 trillion to the deficit even after accounting for the positive impact from economic growth.

The announcement helped halt progress on the tax effort and presented a stark challenge to a core tenet of the Republican Party’s economic philosophy.

Sen. Patrick J. Toomey (R-Pa.), who has helped shape the tax effort, declared on the Senate floor the same day, “If this legislation is signed into law, we are going to have a smaller deficit in future years than we are on a path to have now.”

His was only the latest comment from a prominent Republican spelling out a faith in tax cuts not adding to the deficit.

“The plan will pay for itself with growth,” President Trump’s treasury secretary, Steven Mnuchin, said this spring about Republicans’ emerging tax plan.

“Faster economic growth helps raise the economy, which raises revenue. And that helps us tackle the deficit,” House Speaker Paul D. Ryan (R-Wis.) said in October.

Republicans seemed almost shocked by how little credit the report gave to the power of tax cuts to drive economic growth. The tax committee projected the bill would raise economic growth by only 0.8 percent over a decade, a small fraction of what Republicans had projected.

“That’s a little surprising to me because obviously we’ve seen estimates all over the place, but less than 1 percent growth over 10 years is a little hard to process,” said Sen. James Lankford (R-Okla.).

Some Republicans argued that the tax committee’s report just couldn’t be correct.

“The good news in all this is what it demonstrates is what we’re trying to do here actually generates economic growth. It actually generates additional revenue for the federal treasury,” said Sen. John Thune (R-S.D.). “We happen to think the assumptions used by the Joint Committee are not accurate.”

Yet outside experts were not surprised by the results, which align with the view of many mainstream economists and several independent analyses.

“It would be awesome if you could cut taxes and it wouldn’t cost anything, but there’s not any evidence the world works that way,” said Len Burman, co-founder of the Tax Policy Center and a past president of the National Tax Association.

Many GOP lawmakers came to office on the promises of reining in the federal debt, which nearly doubled under President Barack Obama. And Republicans in earlier incarnations of their tax plans had planned to fully offset tax cuts with other tax hikes, but those plans fell apart in the face of corporate opposition.

Since then, party leadership has shown less concern for the nation’s fiscal sustainability. Onetime fiscal hawks like White House budget director Mick Mulvaney, who used to favor radical actions to stem the deficit as a member of the House, have now put far more emphasis on tax cuts.

The current plan would spend about $1.5 trillion over a decade on tax cuts benefiting individuals and corporations. The Senate bill would make the tax cuts for individuals temporary, to comply with Senate rules that prevent the passage of legislation that would grow the deficit after a decade.

The House has already passed its legislation, and anything that passes the Senate would have to be reconciled with the House bill before it could be sent to Trump for his signature.