It's Goldman present vs. Goldman past on Trump's tax plan and a $2 trillion difference.

The math on the tax blueprint presented by National Economic Council director Gary Cohn and Treasury Secretary Steven Mnuchin last week turned White House officials doesn't add up, according to a Wednesday note from Goldman Sachs (GS) - Get Report . The White House officials' plan to drop the tax rate to 15% on corporations and pass-through businesses would blow a hole in the deficit that it would be hard to make up for with growth.

Taxing pass-through businesses at Trump's proposed 15% corporate rate instead of the individual rate could lower tax revenues by $2 trillion over 10 years, said Goldman analysts Daan Struyven and Alec Phillips. Lowering the rate would wipe out $1 trillion, and likely changes in behavior would take another $1 trillion off.

The 15% pass-through rate would give corporations an incentive to reorganize themselves as pass-through entities, such as S Corporations, partnerships and LLCs, and would push more individuals to shift income from wages and salaries to business income to take advantage of the lower rate. And in all that finagling, trillions of dollars in taxes would dissipate.

"Such a large cost would represent a substantial share of any politically feasible tax cut that Congress might pass," the analysts said.

The White House proposal would likely boost the share of pass-throughs in total business income, continuing an ongoing trend. Relatively lower tax rates for pass-throughs since the 1980s have contributed to the gradual decline in the corporate share in business income from 75% in 1980 to 35% today. Former Obama economic adviser Austan Goolsbee estimates that a 10 percentage point increase in the corporate tax rate reduces the number of firms that pay corporate rates by 5% to 10%.

The Trump tax plan would also push pass-through business owners to shift their incomes from wages and salaries to business income. Under Trump's plan, top income earners would face a 35% tax rate, well above the 15% on business income.

Goldman points to evidence from the U.K., Finland, Sweden and Kansas, suggesting that a 20 percentage point gap between individual and business rates would significantly move the needle.

"The upshot is that the 15% business tax rate in the White House proposal could cost almost $2 trillion over 10 years, with about half of the cost arising from plausible income shifting," Struyven and Phillips said.

Their conclusion: policymakers will likely opt for a higher pass-through rate, be it the 25% rate listed in the House Republican's tax blueprint or some other, non-15% rate.

The analysts acknowledge that the Trump tax plan does have potential growth benefits -- the assumption being that lower tax rates leads to increased economic output. But they appear not to be as sold on the amount of expansion the Trump team is promising. The White House has set a goal of 3% economic growth.

"This tax reform package is about growing the economy, creating jobs," Cohn said in a press briefing last week.

"The president is determined to unleash economic growth for businesses," Mnuchin said. "This is not just about large corporations. Small and medium-sized businesses will be eligible for the business rate as well."

The two former Goldman executives don't appear to have the buy-in of two current Goldman analysts who say their tax plan won't work out as well as they appear to believe.

Repeats story published May 3.

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