Nine distinguished conservative economists sent a letter to Treasury Secretary Steven Mnuchin laying out why they believe the GOP’s tax plan would generate additional economic growth — and additional revenue that would bring down the cost of the tax cuts.
The economists include Douglas Holtz-Eakin, Glenn Hubbard, George P. Schultz, Larry Lindsey and John B. Taylor. They write that corporate tax cuts of the sort being proposed in the House and Senate tax bills could increase GDP growth by 0.3 percentage points a year for a decade, or 0.4 percentage points if the immediate expensing of business equipment and investment was made permanent. Those projections assume that tax code changes don’t add to the deficit, but the economists add that “the impact of changes in interest rates resulting from greater investment demand and government borrowing are likely to be relatively small.”
The Committee for a Responsible Federal Budget, meanwhile, issued a report Monday arguing that "while 0.4 percentage points might sound small, such an increase in growth is highly unlikely to materialize as a result of tax reform alone." The more likely result, according to the report: "no more than 0.1 percentage points per year on an ongoing basis."
The economists' letter does not say that the tax cuts will pay for themselves, as Mnuchin has claimed, but the Treasury secretary was happy to get the expert support. “We are very encouraged that findings by this preeminent group of economists supports [sic] our strong belief that the tax reform proposals before Congress will lead to substantial economic growth,” Mnuchin said in a statement touting the letter.