Macroeconomic Analysis of the Tax Cuts and Jobs Act as Passed by the Senate

The Tax Policy Center has released an analysis of the macroeconomic effects of the Tax Cuts and Jobs Act as passed by the Senate on December 2, 2017. We find the legislation would boost US gross domestic product (GDP) 0.7 percent in 2018, have little effect on GDP in 2027, and boost GDP 0.1 percent in 2037. The resulting increase in taxable incomes would reduce the revenue loss arising from the legislation by $186 billion from 2018 to 2027 (around 13 percent). Because most of the tax cuts expire after 2025, we expect deficits (not including interest costs) would decline from 2028 to 2037, and macroeconomic feedback would boost the deficit savings by $34 billion over that interval. Including macroeconomic effects and interest costs, the legislation is projected to increase debt as a share of GDP over 5 percentage points in 2027 to 96 percent of GDP, and over 4 percentage points in 2037 to 117 percent of GDP.