GOP tax plan’s promises facing widespread doubt

WASHINGTON (AP) — It’s a once-in-a-generation opportunity to fix a tax code that stifles business investment, keeps trillions in corporate profits languishing overseas and slows the American economy.

So argue Republicans in Congress, who hail their tax overhaul as an economic tonic that will deliver benefits to ordinary Americans well into the future.

Democrats and most nonpartisan analysts see things rather differently — and they point to history to argue their case. They see the tax plan as an ill-conceived bill that will further enrich the wealthy and swell the government’s debts by at least $1 trillion in the next decade. Previous tax cuts, they note, have done little to boost hiring, raise wages or accelerate economic growth.

Either way, President Donald Trump is prepared to sign the measure into law this week, to take effect in 2018, after the House and Senate each passed it Wednesday. The bill — approved without a single Democratic vote in Congress —will mark the most far-reaching rewrite of tax law since 1986.

Over the weekend, Trump spoke expansively about the economic bounty he said the bill would unleash. Noting that the American economy grew at an annual rate of at least 3 percent in each of the past two quarters, Trump predicted that “we could go to 4, 5, or even 6 percent, ultimately.... We are really going to start to rock.”

The administration’s official forecasts are more restrained. The Treasury Department and the White House budget office predict that the tax bill and other policy steps will support average annual growth of 2.9 percent from 2018-2027. That estimate adds about 1 percentage point to the average annual growth the Congressional Budget Office had forecast before any policy changes.

Nonpartisan observers expect the bill to deliver far less. The University of Pennsylvania’s Penn Wharton Budget Model says it will increase growth by no more than 0.12 percentage point a year from 2018 to 2027— and swell the federal debt by at least $1.9 trillion in that time.

The plan is nothing if not ambitious.

It permanently slashes the corporate tax rate to 21 percent from 35 percent. It imposes a low one-time tax on companies’ overseas earnings, nudging them to return money they’ve stashed abroad. It provides a windfall to people who pay the personal tax on business earnings. It will narrow and eventually end the tax on wealthy estates. And it will slash individual tax rates — but allow those cuts to expire in 2026.

The plan reflects the economic philosophy that has dominated the Republican Party since the presidency of Ronald Reagan in the 1980s: That cutting taxes and regulations and shrinking government will spur businesses to invest — in factories, equipment, software, people — and thereby energize the American economy. The benefits of a tax windfall to corporations and the wealthy will trickle down, in time, to ordinary Americans.

The Republican tax plan, its architects say, could accelerate investment.

San Marcos Daily Record

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