GOP tax cuts will pay for themselves — but only if other changes happen too, Treasury says

Key Points
  • The Treasury Department projects that Republican tax cuts will pay for themselves.
  • However, it assumes other policy changes that have not yet happened.
  • The Treasury estimate is significantly more optimistic than other independent projections.
Treasury Secretary Steve Mnuchin with national debt signage in background.
Tom Williams | CQ Roll Call | Getty Images

The Treasury Department on Monday estimated that Republican tax cuts will pay for themselves through growth — but it assumes other policy changes that have not yet happened will take place.

In a one-page analysis, the agency projected that the tax plan as passed by the Senate Finance Committee would boost the real GDP growth rate to 2.9 percent over 10 years, up from a previous 2.2 percent assumption. That growth would lead to a $1.8 trillion increase in tax revenues — more than enough to cancel out the $1.5 trillion in revenue lost from the tax cuts, the Treasury says.

The Trump administration estimate is more optimistic than others that have modeled potential growth and revenue. The congressional scorekeeper, the Joint Committee on Taxation, has estimated that the same Senate plan would increase deficits by more than $1 trillion over a decade, even after a modest growth increase is taken into account.

The Treasury estimate also includes policy changes that have not yet happened. It expects that about half of the GDP boost will come from corporate tax cuts. The other half will come from individual and pass-through tax changes as well as what the Treasury called "regulatory reform, infrastructure development and welfare reform as proposed" in the Trump administration's fiscal 2018 budget.

It's unlikely that Congress will pass the White House budget as proposed, and there is no guarantee that GOP lawmakers will adopt the infrastructure package that President Donald Trump seeks.

In a statement, Senate Minority Leader Chuck Schumer, D-N.Y., called the analysis "fake math."

"It's clear the White House and Republicans are grasping at straws to prove the unprovable and garner votes for a bill that nearly every single independent analysis has concluded will blow up the deficit and generate almost no additional economic activity to make up for it," he said.

The Trump administration has repeatedly argued that major tax cuts will pay for themselves through growth.