Bush Tax Plan Would Add 50 Percent to Federal Debt | Washington Examiner
Jeb Bush's plans for tax cuts would add 50 percent to the federal debt over a decade, according to an analysis published Tuesday by an influential Washington research organization.
The Tax Policy Center, a nonprofit think tank, estimated that the former Florida governor would cut taxes for everyone, including by an average of $800,000 for the top 0.1 percent of earners, if he succeeds in his Republican presidential bid.
Bush's plan is to lower individual and corporate tax rates and make up some of the lost revenue by eliminating loopholes, credits and other tax breaks. But the revenue-raising provisions would fall far short of making up the difference, by $6.8 trillion over 10 years, according to the Tax Policy Center. Including interest costs on the new debt, that would amount to more like $8 trillion. The current debt is $18.8 trillion.
"If you were thinking about designing a plan that would embody all of the supply-side elements you could imagine, this plans embodies that pretty well," said Len Burman, an analyst at the Tax Policy Center.
"The big issue with the plan is that it loses a whole lot of revenues," Burman said, explaining that it would be unlikely, politically, that the plan could be adopted as written, even though it represented a "serious tax reform."
Bush campaign representative Allie Brandenburger responded with criticism of Burman's organization. "Given its history of opposing pro-growth tax policies, it is no surprise the liberal Tax Policy Center is misrepresenting Jeb's plan to create 4 percent growth," Brandenburger emailed the Examiner. "Jeb is the only candidate in this race on either side of the aisle who has put forward a serious and substantive plan to overhaul the broken U.S. tax code to help create 19 million new jobs, raise wages and restore opportunity for Americans across the board, and balance the federal budget with a balanced budget amendment."
The Tax Policy Center's estimate of the loss of tax revenue from Bush's tax cuts is roughly twice as large as estimates from the campaign and from the Tax Foundation, another Washington think thank that is more to the right of center.
The Tax Policy Center analysis doesn't include the potential for greater revenues that would come if the tax plan accelerated economic growth. On a call with reporters, Burman said it was not clear if the plan would yield greater economic growth. While lower tax rates and a simplified tax system would be conducive to growth, the added federal debt would lower growth by driving up interest rates and "crowding out" private investment.
Bush has said that his tax cuts would be paired with spending cuts. But an analysis of his entitlement spending reform plans from the Committee for a Responsible Federal Budget placed the total 10-year savings at just $285 billion, far short of the lost tax revenue. Bush currently ranks fifth in the Washington Examiner's presidential power rankings.
Bush's plan would cut the top marginal tax rate from 39.6 percent to 28 percent and the top corporate tax rate from 35 percent to 20 percent. He would lower the tax burden on lower-income families by cutting lower tax rates and nearly doubling the standard deduction. He also would allow businesses to immediately write off investments, and he would eliminate the estate tax.
The result of all those changes is that the average taxpayer would see taxes drop by $2,813. While the bottom fifth of income earners would see their incomes rise 1.4 percent, or $184, the benefits of Bush's plan would increase as income rises. The top 0.1 percent would get a 12 percent boost in take-home pay, or more than $800,000.
The analysis is the first performed by the Tax Policy Center, which says it plans to perform similar analyses for other candidates. The analysis for the plan of Donald Trump, currently atop the polls among GOP candidates, would likely show even greater revenue losses as his plan is similar to Bush's but with lower tax rates. Trump currently ranks second in the Examiner's power rankings.
The organization's score of Mitt Romney's tax plan in 2012 helped provide President Obama with a talking point against the Republican former Massachusetts governor. That analysis found that Romney's tax rate cuts would expand the deficit unless taxes rose for the middle class, a finding that the Obama campaign seized on to accuse Romney of catering to the wealthy.
The model used in the analysis is based on a file of 136,000 tax returns provided by the Internal Revenue Service, the Tax Policy Center said. The group, which includes a number of former staffers for government agencies that performed similar tax analyses, has used and refined the model since 2001.