12:26 PM, Dec 11, 2017 — The Senate Committee’s Finance Tax Reform Plan could increase tax revenues by approximately $1.8 trillion over a period of ten years, according to a projection released by the US Treasury on Monday which factors in a higher-than-previously projected economic growth rate.
The Treasury’s Office of Tax Policy (OTP) said that it had modeled the revenue impact of higher growth effects using the Administration projections of approximately a 2.9% real gross domestic product (GDP) growth rate over 10 years contained in the Administration’s Fiscal Year 2018 budget.
OTP said that it had compared this 2.9% GDP growth scenario to a baseline of previous projections of 2.2% GDP growth and said that it expects approximately half of this 0.7% increase in growth to come from changes to corporate taxation while it expects the other half to come from changes to pass-through taxation and individual tax reform, as well as from a combination of regulatory reform, infrastructure development, and welfare reform.
“This 0.7% increase in the annual real growth rate results in an increase in tax revenues during the 10-year period of approximately $1.8 trillion,” the Treasury statement said.
The projection follows the Senate passing the ‘Tax Cuts and Jobs Act’ earlier this month, a bill which reduces the US corporate tax rate from a maximum of 35% to a flat 20% rate and allows increased expensing of the costs of certain property for businesses.
For individuals, the bill replaces the seven existing tax brackets with four brackets, repeals the deduction for medical expenses, and consolidates and repeals several education-related deductions and credits.