When the House released its Trump-GOP tax bill last week Americans found out that this proposed legislations would increase the U.S. deficit by $1.4 trillion over the next ten years. However, further analysis shows that after accounting for budget gimmicks and interest costs the real additional burden to the U.S. deficit is well over $2 trillion.
In other words, the tax plan that is being touted by President Trump and other congressional leaders is off by over $700 billion.
Here’s a visual that explains the math behind this greater hit to the country’s fiscal position from the tax plan.
The major drivers of the difference in reporting is that major provisions end arbitrarily after just five years, making them look cheaper than they really are, and the cost of interest.
These math problems with the tax plan will face a real challenge in the Senate which is expected to release its version of the tax bill this week. The approach used by the Senate will have to be realistic as the math used by the House does not comply with the “Byrd Rule”. If a bill adds to the federal deficit after a decade, the Senate will not be able to pass a bill through the process known as reconciliation, which allows legislation to pass with only a simple majority of 51 votes.
That our elected officials in Washington continue to propose tax and budget proposals that contain trillion dollar math errors or gimmicks should be worrisome for all Americans. Good policy that is intended to help Americans should not be made up of gimmicks. If Congress is really serious about reforming a tax code that has not seen major changes in over 30 years it needs to ensure that its numbers are right.
Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.