There are a ton of moving pieces in the tax plan that Republicans unveiled today, including some last-minute changes. I found this big table from the Committee for a Responsible Federal Budget to be helpful in understanding what’s going on.
Big-picture summary is that over the first 10 years, the bill has:
- $1 trillion net tax cut for business owners
- $172 billion tax cut for people who inherit multi-million dollar estates
- $300 billion net tax cut for individuals.
The reconciliation instructions included in the budget resolution that congressional Republicans passed earlier this year call for a $1.5-trillion deficit increase over the next 10 years, so, as you can see, the math works out perfectly. And Republicans did a fair amount of optimization to make the numbers work in this regard.
The estate tax, for example, doesn’t go away entirely until 2024 under their plan, which limits its cost, while most of the tax increases come immediately. On the flip side, the bill provides full expensing of investments and the $300 filer and dependent credit for only five years, and then they mysteriously vanish.
But while the bill is well-optimized to hit the $1.5 trillion target, it doesn’t appear to work at all in terms of complying with the Senate’s rule that reconciliation bills not raise the long-term deficit. The tax cuts will either have to be made temporary (which is what George W. Bush did) or else some kind of big substantive change to the bill has to be made.