The House GOP tax reform blueprint would raise the U.S. gross domestic product by a whopping 9.1 percent, increase wages by 7.7 percent and create 17 million full-time jobs, according to a report released by the Tax Foundation Tuesday.
The proposal – unveiled by the Republican tax task force in late June as part of a six plank policy agenda – is designed to simplify the tax code by dropping four of the seven brackets and reduces rates for both businesses and individuals.
The Washington, D.C.-based, nonpartisan think tank attributed the positive economic benefits to the lower cost of capital due to the lower corporate income tax rate, which would drop from 35 to 20 percent, and the ability for businesses to fully expense capital investment.
While some revenue would initially be lost due to the corporate reduction, cap on the tax rate for pass through businesses and the individual rates dropping to 12, 25 and 33 percent, it would eventually be offset by economic growth.
Due to the projected economic expansion, the income and payroll tax base would dramatically broaden, leading to increased revenue over time.
“As a result, the federal government would see $566 billion in additional individual income tax revenue and $683 billion in additional payroll tax revenue. On the other hand, corporate income tax revenue would actually decline even more on a dynamic basis,” the findings read. “This is because the plan will encourage more investment and result in businesses deducting more capital investments, which would reduce corporate taxable income.”
The Tax Foundation noted most of the revenue loss would be a one time thing and the plan would gradually cost less over time.
The organization said by eliminating itemized deductions with the exception of the mortgage interest deduction and the charitable deduction would raise a whopping $2.3 trillion over the course of 10 years. By doing away with most individual credits, another $104 billion would be raised over a decade.
According to the analysis, all income brackets would see a boost in their earnings, with the top bracket having the most sizable impact, if the plan is enacted.
“On a dynamic basis, all taxpayers would see an increase in after-tax income of at least 8.4 percent,” the study says. “The top 1 percent of taxpayers would see an increase in after-tax income of 13 percent on a dynamic basis.”
House Committee on Ways and Means Chairman Kevin Brady of Texas praised the Tax Foundations work, adding he plans on working with the group as the tax task force continues to expand on the plan.
“As we’ve said before, the blueprint is the beginning of our conversation. As we turn this into actual legislative text, we will ensure the final product is revenue neutral within dynamic scoring,” Brady said in a statement.
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