The House Tax Cuts and Jobs Act, Amended (11/9/17): The Dynamic Effect on the Budget and the Economy

Introduction

Penn Wharton Budget Model’s (PWBM) previously reported static analysis and dynamic analysis of the House Tax Cuts and Jobs Act (TCJA), as of November 5, 2017. Since then the bill was changed by the 1st amendment and the 2nd amendment, and reported out of the Ways and Means Committee on November 9, 2017. This brief updates our previous analysis, including changes made to taxes for pass-through businesses and a special one-time repatriation rate. Readers are encouraged to read our previous analyses for related definitions used in this brief. Table numbers in this brief closely follow those presented in our dynamic analysis.

Budget Effects of the Tax Cuts and Jobs Act

Table 1 shows that over the 10-year budget window, The House Tax Cuts and Jobs Act is projected to reduce federal tax revenues between $1.5 trillion (high initial return to capital) to $1.7 trillion (low initial return to capital). Debt rises by more, by about $2.0 trillion to $2.1 trillion, over this period, due to debt services. By 2040, revenue falls between $3.6 trillion and $4.4 trillion, whereas debt increases by $6.4 trillion to $6.9 trillion.