President Trump’s Tax Reform Will Boost GDP, Wages and Add 340,000 Jobs

President Trump’s Tax Reform Will Boost GDP, Wages and Add 340,000 Jobs

President Trump’s Tax Reform Will Boost GDP, Wages and Add 340,000 Jobs

The final GOP tax bill set for a House vote Tuesday, reportedly will boost GDP (gross domestic product) by 1.7%, lift wages by 1.5%, and add 340,000 full-time jobs to the US economy.

The Tax Foundation analyzed the details of the final bill and said it is a pro-growth plan that will increase revenues by roughly $600-B from expected economic growth, reducing the cost of the bill

The foundation says the bill, as it is written, is expected to increase capital stock by 4.8% and long-run GDP by 1.7%, add 340,000 full-time jobs, and boost wages by 1.5%.

The analysis says GDP could be higher in Y 2018, increasing to 2.45%, which is higher than the baseline growth of 2.01%.

The Tax Foundation report notes that if the plan were made permanent, there would be greater economic effects, but there would also be higher costs.

“If the entire plan were enacted permanently, it would increase long-run GDP by 4.7%, raise wages by 3.3% and create 1.6-M new full-time equivalent jobs,” the report states. “However, the long-run cost of the bill would be $2.7-T on a static basis.”

The bill also would add $448-B to federal deficits over 10 years with economic growth factored in.

The new estimate could allow Republicans to argue that the tax bill will pay for itself.

That’s because the revenue baseline that scorekeepers, including the Tax Foundation, use assumes that Congress would let several existing tax breaks that are already set to expire go off the books, a so-called current-law baseline.

But Congress tends to extend such expiring breaks regularly. So, using a more realistic “current-policy” baseline, that is, assuming that $460-B in expiring tax breaks would be renewed, would make the bill revenue-neutral against a lower baseline number.

The current-policy argument might create a new issue: The bill’s individual tax cuts are set to expire after Y 2025, but Republicans have said that they’ll be so popular, they’ll be extended by a future Congress. If that’s the “policy,” then the effect of extending the tax cuts might have to factor into a current-policy assumption too.

The House votes this afternoon, the Senate tonight or Wednesday morning.

Stay tuned…

 

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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