One of the most controversial aspects of President Trump's tax plan is how much it costs. Republicans approved adding up to $1.5 trillion to America's debt to pay for tax cuts for businesses and individuals, but they claimed that the price tag wouldn't be nearly that high because the plan would unleash a lot more economic growth.
Now Congress's official estimators have weighed in: The Senate GOP bill would add $1 trillion to the debt even after accounting for economic growth generated by the tax cuts. The estimate from the Joint Committee on Taxation, a nonpartisan group of experts, was released Thursday afternoon as lawmakers hotly debated the tax bill on the Senate floor.
The Senate GOP tax plan would cause faster economic growth -- about 0.8 percent more over the next decade, JCT found. But that amount of growth only covers about a third of the cost, far short of what is needed to have revenue-neutral tax reform, as the White House initially claimed.
Republican leaders had originally intended to vote on the Senate bill before the JCT's final cost estimate was released, but JCT rushed to get the analysis done hours before the vote. Several Republicans senators, including Sen. Bob Corker (R-Tenn.), have raised serious concerns about how much the tax plan would add to the debt. He wanted to see the nonpartisan estimate.
“Everyone has known from Day 1 this is very important to me,” Corker said.
Corker is not the only person worried about America's $20 trillion debt rising even higher (about $15 trillion is actually held by the public). Wall Street bank Goldman Sachs put out a warning Thursday morning that the U.S. debt is on track to hit unsustainable levels in coming years. Goldman's note followed on the heels of testimony from Federal Reserve Chair Janet L. Yellen, who cautioned that the country's growing debt is “the type of thing that should keep people awake at night.”
The White House originally argued that the tax cuts would pay for themselves, but almost all independent economists and forecasters said it wouldn't go that far. The JCT estimate ended up aligning closely with the findings of independent groups like the Tax Foundation, the Tax Policy Center and the Committee for a Responsible Federal Budget. In contrast, the White House projected 3 to 5 percent faster growth over the next decade from Trump's tax plan, an amount four times higher than the official JCT score.
Some Republican lawmakers tried to downplay the JCT forecast, arguing that no one can truly know how much growth will come from the tax cuts and that there will still be more changes to the bill before the final vote. The JCT estimate doesn't include those final changes.
“We happen to think the assumptions used by the Joint Committee are not accurate,” said Sen. John Thune (R-SD) shortly after the analysis came out.
Right-leaning organizations such as the Tax Foundation and Koch Industries put out statements questioning several of the assumptions in JCT's modeling. Philip Ellender, Koch Industries’ president of government and public affairs, called the report "more fiction than fact" because it predicts the Federal Reserve will aggressively raise interest rates, although that only made about a $50 billion difference to the projection.
Democrats argue the Senate bill is a giveaway to large corporations at the expense of the middle class. They pointed to the JCT report as proof the American people will have to pay a substantial price.
“It fills our children and grandchildren’s boats with additional debt. They are losers,” said Sen. Richard Blumenthal (D-Conn.).
Goldman noted Thursday that America's debt is already at the highest level since 1950 as a fraction of the economy (the so-called debt-to-GDP ratio). The tax bill would make that higher.
“The tax reform bill and spending increases that are making their way through Congress should increase the deficit further, raising it from 3.2% of GDP in 2016 to 5.1% in 2021,” Goldman wrote.