While not taking issue with my colleague RVB, it’s worth noting that the Hell-breaking comes because the Joint Committee on Taxation (whose chief is a long-time Democratic staffer, Thomas Barthold) has thundered.
The Great Oz has spoken? But maybe its record should earn the Committee a bit more of a reputation as The Man Behind the Curtain. For example, in 2003, when scoring the Bush tax cuts, the JCT predicted it would lead to massive revenue declines. The reality: Between 2003 and 2007, tax revenues were $434 billion higher than JCT had forecast, as the economy grew at an average of 3 percent annually.
Underestimating and lowballing the economic growth that comes from major tax-cuts seems to be the hallmark of many experts. But for the record, here’s what happened over a five-year run following two of America’s historically more recent major tax cuts:
The U.S. economy grew by an average of 5.2 percent annually after the adoption of The Revenue Act of 1964 — the tax-rate-reduction legislation proposed the previous year by President Kennedy. In two years, U.S. unemployment fell from over 5 percent to 3.8 percent by 1966, and to 3.5 percent by 1969. Initial revenue projections for the Act predicted a loss to the federal Treasury, but of course, the rate cuts actually increased overall tax revenues.
The Economic Recovery Act of 1981, a.k.a., Kemp-Roth, a.k.a., the Reagan Tax Cut, lived up to its name. The U.S. economy grew by an annual average of 5 percent. Per the Bureau of Labor Statistics, unemployment hit 9.7 percent the following year, but by the time President Reagan left office, it was at 5.3 percent. And revenues grew.
Back to 2017: The Tax Foundation’s take on JCT’s dynamic scoring of the “Tax Cuts and Jobs Act” now before the Senate is measured but critical. (The Tax Foundation’s own analysis also predicts revenue loss, but half of the JCT’s $1 trillion estimate.) In part:
However, JCT’s results should be viewed as likely underestimating the economic growth spurred by this tax bill. The range of estimates from JCT includes several important assumptions that limit its growth results, particularly, assumptions regarding the Federal Reserve’s response to potential inflation and the United States being a closed economy.
Less kind about JCT is this take by Freedom Partners, which has been all over the tax-reform issue. Says its executive vice president, James Davis:
The Joint Tax Committee was off by nearly half a trillion dollars when projecting revenues from the Bush tax cuts. It’s embarrassing that Republicans in the Senate are suddenly clinging to the findings of a half-finished analysis, based on flawed assumptions, delivered by a group with a historic track record of failure.