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GOP tax plan would increase federal deficits beyond the limit, new analysis shows

  • A new analysis says the House GOP tax bill would reduce tax revenue by $1.7 trillion over the next 10 years.
  • That exceeds the $1.5 trillion permitted under the budget "reconciliation" rules that allow Senate Republicans to sidestep Democratic filibusters.
House Ways and Means Committee Chairman Kevin Brady (R-TX) holds up an example of the 'postcard-sized' form he wants people to use when filing their taxes during a markup session of the proposed GOP tax reform legislation in the Longworth House Office Building on Capitol Hill November 6, 2017 in Washington, DC.
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House Ways and Means Committee Chairman Kevin Brady (R-TX) holds up an example of the 'postcard-sized' form he wants people to use when filing their taxes during a markup session of the proposed GOP tax reform legislation in the Longworth House Office Building on Capitol Hill November 6, 2017 in Washington, DC.

UPDATE: The Tax Policy Center has issued a statement saying it found an error in its analysis involving the child tax credit component of the proposed legislation. The center said it is revising its analysis and will release a corrected version soon.

A new nonpartisan analysis highlights a pitfall of the House GOP tax plan.

The report shows that the House GOP bill would increase federal deficits substantially in the short and long run in ways that would vastly increase the difficulty of passing it in the Senate. The report comes from the University of Pennsylvania's Penn-Wharton economic model directed by Kent Smetters, a former economic advisor to President George W. Bush.

The Penn-Wharton model shows that the House GOP tax bill would reduce tax revenue by $1.7 trillion over the next 10 years. That exceeds the $1.5 trillion permitted under the budget "reconciliation" rules that allow Senate Republicans to sidestep Democratic filibusters.

Moreover, the model projects that the House bill would lose another $2.6 trillion in revenue during the 12 years after 2027. Under the no-filibuster rules, the tax bill would not be permitted to increase the deficit at all after its first 10 years.

The House's tax-writing Ways and Means Committee is considering the legislation this week. If the bill passes the House in its current form, it could be changed in the Senate to avoid long-term revenue increases by making tax cuts temporary, or by identifying new sources of revenue. But either step would diminish the political appeal of the bill to Republicans eager to enact permanent reforms to the tax code.

Separately, a report from the Tax Policy Center was also released, analyzing how much of the tax cut benefits would go to the country's top earners. That study was pulled by the nonpartisan think tank, however, which said its staff had discovered an error in its analysis.

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