Here is what the Tax Foundation says about last week’s proposal:
The House Ways and Means Committee’s Tax Cuts and Jobs Act would fundamentally reform the U.S. tax code for the first time in over 30 years.
Yesterday, the Tax Foundation released a comprehensive overview of the plan, including a summary of its details and macroeconomic analysis of how it would impact federal revenue, wages, GDP, and after-tax incomes.
Here’s what we found:
- The Tax Cuts and Jobs Act would reform both individual income tax and corporate income taxes and would move the United States to a territorial system of business taxation.
- According to the Tax Foundation’s Taxes and Growth Model, the plan would significantly lower marginal tax rates and the cost of capital, which would lead to 3.9 percent higher GDP over the long term, 3.1 percent higher wages, and an additional 975,000 full-time equivalent jobs.
- Our model estimates that the increased economic growth generated by the plan would increase federal tax revenues by nearly $1 trillion over the next decade. These new revenues would reduce the static cost of the plan substantially. Depending upon the baseline used to score the plan, current policy or current law, the new revenues could bring the plan close to revenue neutral.
- On a static basis, the plan would lead to 0.9 percent higher after-tax income for all taxpayers and 3.3 percent higher after-tax income for the top 1 percent in 2027. When accounting for the increased GDP, after-tax incomes of all taxpayers would increase by 4.4 percent in the long run.
- While our results differ from those of the Joint Committee on Taxation, some of these results are attributable to long-standing differences between the two models.
For a full overview of the plan, including a line-by-line rundown of how each provision would affect revenue and GDP, download a copy at the first link, below.
Additionally, we used our macroeconomic model to estimate how the Tax Cuts and Jobs Act would impact each state. We found that the after-tax income for the average American middle-income family would increase by about $2,598 over ten years.
Click the second link below to see how Illinois would be affected.
The final button shows a table illustrating the state-by-state impact of the plan for both new jobs and the boost to after-tax incomes for middle-income families.
The table below illustrates the state-by-state impact of the plan for both new jobs and the boost to after-tax incomes for middle-income families.
Impact of the Tax Cuts and Jobs Act on Jobs and After-Tax Incomes by State
Source: Tax Foundation, Taxes and Growth Model
|Note: The results here use Census figures to illustrate the income gains for median households by state. These estimates will differ slightly from our previous estimates using aggregate IRS figures to illustrate the income gains for taxpayers at various income levels.
|| Estimated FTE Jobs Added (10-Year Estimate)
||Estimated Gain in After-Tax Income for Middle-Income Family (10-Year Estimate)