Trump relies on economic expansion to overcompensate for the enacted tax reductions. However, according to analysts, the proposed 'grand, aesthetically pleasing legislation' may not yield the expected results.
Going for Broke? Assessing the Economic Growth Potential of the GOP's Tax and Spending Package
Politicians are yapping about a monster tax and spending cuts package claiming it'll usher in a golden era of economic boom. But the talk's much louder than the walking, according to economic experts across the political spectrum. Here's a lowdown on the bill and why many argue it'll underdeliver.
On NBC's "Meet the Press," House Speaker Mike Johnson called the bill "the Big, Beautiful Bill," insisting it'd increase everyone's income. But the naysayers have raised their voices louder: they contend the package won't produce the much-hyped economic oomph, and might even underwhelm compared to the 2017 Tax Cuts and Jobs Act.
Flashback to 2017: while economic estimates varied slightly, most found that the House-passed package would provide a minor economic nudge and barely offset its trillions of dollars of tax cuts. The primary issue? The bill wouldn't deliver substantial long-term corporate tax relief - the driving force behind economic expansion.
You might be wondering, what's in the House bill? The central focus is to prolong the approximately $4 trillion in individual tax cuts from the 2017 package that were due to expire at the end of this year. The bill also aims to fulfill a few of Trump's campaign promises, such as temporarily eliminating taxes on tips, overtime, and auto loan interest. On the corporate tax side, the package would restore a tax break from the 2017 package, allowing businesses to fully write off the cost of equipment in the first year it was purchased.
But the 2017 Tax Cuts and Jobs Act contained a massive business tax break - the permanent reduction of the corporate tax rate from 35% to 20% - that some argue drove the economic growth in the package. Yet, the House bill doesn't replicate this break, leading many experts to question its ability to stimulate long-term economic growth.
While the Senate version, which was released this week, features provisions to make certain business tax provisions permanent, both chambers would require navigating their differences on these and other provisions. As of yet, growth estimates for the Senate bill remain elusive.
In the meantime, the House-approved bill would swell the federal budget deficit by $1.7 trillion over 10 years, even with its roughly $1.5 trillion in spending cuts. But what's a trillion or two among friends, right?
Sources:
- The Tax Foundation
- Penn Wharton Budget Model
- Congressional Budget Office
- Brookings Institution
The GOP's Tax and Spending Package, coined as the "Big, Beautiful Bill," is under scrutiny for its ability to deliver sustained economic growth, a claim echoed by House Speaker Mike Johnson. However, economic experts question its effectiveness, partly because it lacks the meaningful long-term corporate tax relief that was a driving force behind the 2017 Tax Cuts and Jobs Act's economic expansion. This raises concerns about the bill's potential impact on finance, business, and politics.
