House and Senate negotiators are rushing to finalize the tax legislation and deliver the promised measure to President Donald Trump before Christmas. Trump will try on Wednesday to sell the American people on a GOP tax overhaul that is unpopular with many. His pitch: the plan will lift all economic boats, bringing a brighter future for taxpayers and their families, according to spokeswoman Lindsay Walters.
A Treasury Department analysis issued Monday estimated the tax legislation will generate a large part of $1.8 trillion in new revenue over 10 years.
Trump and Republican leaders in Congress have promoted the massive tax plan by promising that the tax cuts will boost the economy and create jobs. Their idea is that growth sparked by the legislation will let the tax cuts pay for themselves and not balloon the $20 trillion deficit.
Public polling shows many Americans are unhappy with the proposal. The separate bills recently passed by the House and Senate combine steep tax cuts for corporations with more modest reductions for most individuals.
Both measures would cut taxes by about $1.5 trillion over the next decade while adding billions to the deficit. They would bring the biggest overhaul of the U.S. tax system in 30 years, pushing into every corner of the U.S. economy and society. They would double the standard deduction used by most Americans to $12,000 for individuals and $24,000 for couples.
The administration’s estimate of new revenue from the tax plan is a lot higher than nonpartisan congressional analysts have projected. The Joint Committee on Taxation estimates that growth stimulated by the anticipated tax cuts in the Senate bill will generate some $408 billion in additional tax revenue over 10 years. For the House bill, the House-Senate committee sees $483 billion in new revenue.
The Treasury analysis “is nothing more than one page of fake math,” said Senate Democratic Leader Chuck Schumer.
The analysis includes an assumption that tax cuts and other administration policies would cause the economy to expand at a 2.9 percent annual pace over 10 years. Economic growth at that level would, in theory, be enough to keep the national debt from rising.
But most analyses have concluded that the tax plan would add at least $1 trillion to budget deficits in the next decade because the analyses foresee significantly less growth resulting from the tax cuts.
The Treasury Department analysis says about half the expected increase in economic growth likely will result from tax benefits for corporations. Trump and the Republicans have insisted that businesses will use the tax savings to invest and create new jobs.
According to the analysis, the other half of the increased growth will come from tax reductions for individuals and businesses whose profits are reported on owners’ personal income tax returns, as well as from planned administration initiatives such as infrastructure development and a welfare overhaul.
GOP leaders in Congress aim to iron out the significant differences between the House and Senate tax bills to pass a final blended package. Republicans are determined to produce the first revamp of the nation’s tax code in three decades and prove they can govern after their failure to dismantle Barack Obama’s health care law.
Rep. Kevin Brady, who heads the House Ways and Means Committee and is a key leader in the House-Senate compromise talks, said Monday that lawmakers were moving toward a vote on the final package next week. Still, key issues appeared to remain unresolved.
“I’m pleased with the progress we’re making,” Brady, R-Texas, told reporters. “We still have work to do.”
The only issue for which Brady noted a firm commitment was repeal of the inheritance tax on multimillion-dollar estates, a benefit for ultra-wealthy Americans. “In the House, we feel very strongly about fully repealing the estate tax,” he said.
Republican leaders have struggled to placate GOP lawmakers from high-tax states like California, New York and New Jersey whose constituents would be hit hard by the elimination of the prized federal deduction for state and local taxes. Repeal of the deduction added up to $1.3 trillion in revenue over a decade that could be used for deep tax cuts.
Lawmakers finally settled on a compromise in both bills — full repeal of the state and local deductions for income and sales taxes, but homeowners would be able to deduct up to $10,000 in local property taxes.
Associated Press writers Jill Colvin and Josh Boak contributed to this report.