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Republicans' proposed tax-cut plan will lower the corporate tax rate from 35 to 20 percent and cost the federal government $1.5 trillion over a decade. As a selling point, Republicans have said the plan will pay for itself by boosting economic growth. But a new analysis says that's not true.

On Monday, the nonpartisan Tax Policy Center said the bill won't stoke the economy enough to cover its cost. The organization found that under the plan, GDP would rise 0.6 percent in 2018 and 0.2 percent in 2037. That would amount to $169 billion in tax revenue — only a fraction of the $1.5 trillion cost.

“The increase in output would boost revenues, offsetting roughly a tenth of the revenue loss projected under the legislation without accounting for macroeconomic feedbacks,” the Tax Policy Center said.

Republicans have argued that cutting taxes on the wealthy and on businesses would spur hiring and investment, and bring jobs back from overseas.


“We think we can drive a lot of business back to America, we can drive jobs back to America, we can make ourselves very competitive,” said White House economic adviser Gary Cohn on CNBC in September. “We think we can pay for the entire tax cut through growth over the cycle.”

In September, Treasury Secretary Steve Mnuchin said the tax plan would “not only…pay for itself, but it will pay down debt” as well, spurring $2.5 billion in growth. But an analysis by the Wharton School of Business found that the plan would actually create a $3.6 billion budget shortfall by 2040.

The tax plan was passed by the House last Thursday, and Senate Republicans plan a vote on its version by the end of the year. Both versions been loudly criticized by Democrats because tax reductions on middle-income brackets would phase out after a number of years, creating a permanent tax cut for the wealthy and corporations but ultimately raising taxes on members of the middle class. The Senate version contains provisions that would repeal Obamacare's individual mandate and cut Medicaid spending; if passed, the bill could destabilize the health-insurance exchanges.

The next step is for the Senate to pass its version and for both chambers to reconcile their differences into one bill.  

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