Tax Plan’s Biggest Cuts Could Be in Living Standards
A decade ago or so, the nonpartisan Tax Policy Center and the liberal-leaning Center on Budget and Policy Priorities estimated
that making the Bush tax cuts permanent — rather than letting them expire in 2010 — would increase the after-tax income of people earning $1 million or more up to 7 percent, an order of magnitude more than it would increase the size of the economy in the long term.
In the summer of 2006, as President George W. Bush was pressing to make permanent the tax cuts he had pushed through Congress in 2001
and 2003, the Treasury Department published a so-called dynamic analysis that, the administration hoped, would prove the undoubted economic benefits of the extension.
Treasury Secretary Steven Mnuchin insists that the tax overhaul passed by Republicans in the Senate
this month would increase annual economic growth by 0.7 percentage points over the next decade.
But its conclusions didn’t draw much applause from the White House: In the long term, the Treasury’s
Office of Tax Analysis found, the tax cuts would expand the economy by all of 0.7 percent.
It never specified what it meant by “long term,” but on the assumption it means a couple of
decades, the tax change would add 0.035 percent to annual economic growth over the period.
But an analysis by Congress’s nonpartisan Joint Committee on Taxation projected less stellar results:
In the course of 10 years, the tax cuts would make gross domestic product 0.8 percent larger.
The bottom 80 percent of American families, by contrast, would actually be worse off because they would bear the brunt of paying for the cuts.