Here is some data on and analysis of the 10-year cost of the final GOP tax bill and a comparison with the Senate bill.
I was curious to understand —
- How Republican conferees made the tax bill more generous and yet keep the deficit number the same as the Senate bill?
- Where are the revenues coming from to make up for the massive tax cuts?
Notes on the table:
- The table shows the net effect on revenues over 10 years of various tax bill items.
- Negative numbers means tax cuts that decrease revenue and increase the deficit
- Positive numbers mean tax increases or additional revenue which decrease the deficit
- Numbers are from the JCT report on the two tax bills (see the reference section for links)
- All numbers are in billions of dollars.
- These numbers do not include the effects of dynamic scoring
|
Senate Bill |
Final Bill |
Change from Senate Bill |
Comments |
Individual Tax Reform |
|
|
|
|
New brackets and tax rates |
-1,173.80 |
-1,214.20 |
Higher tax cuts for high income earners |
Most of this goes to high income earners |
Higher standard deduction |
-736.9 |
-720.4 |
|
|
CTC change |
-584.3 |
-573.4 |
Less generous, in spite of Rubio’s tantrums |
|
Repeal of deduction for personal exemptions |
1,220.60 |
1,211.50 |
|
This washes out std deduction and CTC changes |
Require valid Social Security number for CTC |
23.9 |
29.8 |
|
Punish undocumented workers |
Chained CPI |
134 |
133.5 |
|
Lower inflation index. Big revenue generator from middle class |
Pass-thru income - 20% deduction |
-362.2 |
-414.5 |
More tax cuts for high income earners |
Huge tax cut for businesses and certain professionals |
SALT deduction limitation |
977.7 |
668.4 |
Increases tax for upper income |
$10K allowed in final bill |
AMT threshold increase |
-769.1 |
-637.1 |
Decreases tax for upper income |
Washes out SALT |
Estate tax |
-83 |
-83 |
|
For a few billionaires |
ACA mandate repeal |
318.4 |
314.1 |
|
Big revenue generator from middle income earners |
Repeal of other deductions |
148.30 |
158.70 |
|
Revenue generator from middle income earners |
Individual Tax Reform Total |
-886.40 |
-1,126.60 |
|
|
|
|
|
|
|
Business Tax Reform |
|
|
|
|
Corp AMT repeal |
-40.3 |
-40.3 |
|
|
21 Percent Corporate Tax Rate |
-1,329.20 |
-1,348.50 |
More generous |
This is 1.348 trillion dollars! |
Small Business Reforms |
-51.6 |
-56.4 |
|
Laundry list of “reforms” |
Elimination of various deductions, etc |
738.7 |
791.4 |
|
Laundry list of revenue generators; subject to abuse |
Business Tax Reform Total |
-682.4 |
-653.8 |
|
|
|
|
|
|
|
International Tax Reform |
|
|
|
|
Deduction for dividend |
-215.5 |
-223.6 |
|
Tax giveaway |
Repatriation of offshore profits; final bill has slightly higher rate, but still much lower than corp. tax rate |
184.8 |
338.8 |
Tax rate was increased in final bill to generate revenue, so that other tax cuts can be offset |
Reduced tax rate for untaxed offshore stash of profits; may not fully materialize |
Base erosion and anti-abuse tax |
137.6 |
149.6 |
|
|
Other |
47.7 |
59.6 |
|
|
International Tax Reform Total |
154.6 |
324.4 |
|
|
|
|
|
|
|
Total |
-1,414.20 |
-1,456.00 |
Slightly higher deficit, but below the $1.5T limit |
To be paid by our children |
Projected revenue from corporate tax reform (the positive values above) |
|
1,339 |
|
How much of this will we really see? |
Analysis
- The deficit number in the final bill increased only slightly from the Senate bill in spite of the more generous tax cuts by increasing the tax rate on repatriation of existing offshore profits of multinationals, which may or may not materialize.
- For low and middle income earners, tax cuts and tax increases are more or less a wash
- The big revenue generators are the ACA mandate repeal and chained CPI (inflation index), which comes off the backs of low and middle income earners
- The pass-thru tax change (first 25% is tax-free) is a nice tax-cut for businesses and certain professionals.
- Corporations get a hefty tax cut; some of it is offset by eliminating or reducing deductions, which may not materialize
- Multinationals get a nice tax cut on foreign dividends and a nice low rate (8-percent rate for illiquid assets, 15.5-percent rate for liquid assets) on their stash of offshore profits. The latter is a revenue generator, which may not fully materialize (why would a corporation pay 8% or 15.5% tax when it can get away with paying nothing?)
- Various provisions in the international tax reform are used to generate a good chunk of revenue to offset tax cuts, but these revenue generators are less likely to materialize, as corporations and their tax lawyers will find ways to side-step these tax increases and deduction repeals.
- The hastily crafted tax bill invites abuse as people will figure out ways to take advantage of the corporate tax rate and pass-through deductions. This will also add to the deficit. See papers.ssrn.com/...
- Note that from 2026 onwards, for individuals, the new tax law expires and it goes back to the current law, but the ACA mandate repeal stays in place and the chained CPI stays in place, meaning higher taxes for low and middle income earners compared to current law. Corporate tax law changes stay in place, which is the primary goal of this tax law change.
- Note that the $1.45T deficit number is in addition to the approximately $10T projected deficit under current law.
In short, the tax cuts for corporations, businesses and rich individuals are real, while the projected revenues generated from corporate tax “reform” ($1.34T) are less likely to fully materialize. Tax loopholes will further shrink revenues. Hence, deficits will most likely be much higher, which will lead to cuts in social programs.
For a summary of the tax bill, see diary “The Final GOP Tax Scam Bill” at www.dailykos.com/...
Other Reactions and Analysis
References
- Tax Bill — docs.house.gov/… (includes JCT report)
- Senate bill JCT report — www.jct.gov/…
- The Final GOP Tax Scam Bill — www.dailykos.com/… (summary of the tax bill)
- The Winners and Losers in the Tax Bill — www.nytimes.com/...
- Final CTC Changes Don’t Alter Tax Bill Basics: 10 Million Working Family Children Get Little or Nothing — www.cbpp.org/…
- What’s in the new tax bill — www.politico.com/…
- What's in the GOP's final tax plan — money.cnn.com/…
- The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the New Legislation — papers.ssrn.com/…
P.S. I am not a tax professional, so please take the descriptions and values with a grain of salt. This diary contains a high-level summary, not a comprehensive or complete description of the 1097-page tax law. If you find errors or issues that should be highlighted, please post some comments and I will update the diary.