T1 | U.S. Treasury Office of Tax Policy | December 11, 2017 | one-page analysis, body and notes. Original government PDF https://www.treasury.gov/press-center/press-releases/Documents/TreasuryGrowthMemo12-11-17.pdf (redirects today); faithful copy of original PDF https://www.p2016.org/chrntran/TreasuryGrowthMemo12-11-17.pdf

Analysis of Growth and Revenue Estimates Based on the U.S. Senate Committee on Finance Tax Reform Plan

Treasury’s Office of Tax Policy (OTP) has modeled the Senate Finance tax reform plan and overall has similar analysis to the Joint Committee on Taxation (JCT) on a static basis, with a score of approximately -$1.5 trillion on a current law basis and approximately -$1 trillion on a current policy basis.¹ The difference between current law and current policy is that current law assumes existing provisions that are set to expire, such as bonus depreciation, do expire; while current policy assumes these are renewed, as has often been the case historically.

In addition to a static score, JCT calculated the increase in government tax receipts in the Senate Finance tax plan due to growth. They estimated $408 billion of additional tax revenue. Adding this $408 billion to the static score leads to a change in total projected receipts under JCT’s assumptions of approximately -$1 trillion on a current law basis.

OTP has modeled the revenue impact of higher growth effects, using the Administration projections of approximately a 2.9% real GDP growth rate over 10 years contained in the Administration’s Fiscal Year 2018 budget.²

OTP compared this 2.9% GDP growth scenario to a baseline of previous projections of 2.2% GDP growth. Treasury expects approximately half of this 0.7% increase in growth to come from changes to corporate taxation. We expect the other half to come from changes to pass-through taxation³ and individual tax reform, as well as from a combination of regulatory reform, infrastructure development, and welfare reform as proposed in the Administration’s Fiscal Year 2018 budget.

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. Adding this $1.8 trillion of incremental revenue to the static current law score of -$1.5 trillion results in total receipts over the 10-year window increasing by $300 billion. These increased receipts are primarily collected in the last five years, as full expensing creates growth in early years but results in a deferral of collection of taxes.

We acknowledge that some economists predict different growth rates. OTP projects that at approximately 0.35% of incremental annual GDP growth, Treasury tax receipts would generate approximately $1 trillion of incremental revenue.

Neither JCT nor Treasury has released a score showing increased tax receipts from the House plan, though we would not expect the results to be materially different.

¹ OTP assumed similar levels of savings from the repeal of Obamacare’s individual mandate as JCT. All scores are on a 10-year time period.
² More specifically, growth is 2.5% in 2018, 2.8% in 2019, and 3.0% thereafter, as developed by Treasury, OMB, and CEA for the President’s budget (FY2018).
³ Business tax receipts are estimated to be approximately half from corporations and half from pass-through businesses, although this has varied over time.

T2 | Treasury press release | December 11, 2017 | https://home.treasury.gov/news/press-releases/sm0233

The U.S. Department of the Treasury today released a summary analysis from the Office of Tax Policy (OTP) of the expected tax receipts associated with the Administration’s economic growth initiatives. Among the key findings is that $1.8 trillion of additional revenue would be generated over 10 years based upon expected growth.

“We are pleased to release an analysis demonstrating the revenue impact of the Administration’s economic agenda. 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,” said U.S. Treasury Secretary Steven T. Mnuchin.

T3 | Treasury remarks as prepared for delivery | November 2, 2017 | https://home.treasury.gov/news/press-releases/sm0204

The effect of these reforms will be higher economic growth. An additional one percent of growth adds over two trillion dollar of revenues to pay down our debt. Economic growth is not academic – it means better-paying jobs, innovative goods and services. It means economic growth and opportunities for a new generation of Americans.
