Treasury Secretary Steven T. Mnuchin received correspondence from the economists addressing the implications of tax reform for economic growth.
“We are very encouraged that findings by this preeminent group of economists supports our strong belief that the tax reform proposals before Congress will lead to substantial economic growth,” Mnuchin said.
Officials said the letter referenced 30 basis points as a fair estimate of the incremental annual growth that would result from corporate tax reform while determining with permanent full expensing, 40 basis points would be a fair estimate.
“The House and Senate bills also contemplate a number of individual tax provisions that can affect economic activity and incomes,” the economists wrote. “In recognition of the fact that non-corporate business income is substantial in the United States, both bills would reduce taxation of non-corporate business income and increase the amount of capital expensing allowed. On the individual side, both the House and Senate bills reduce marginal tax rates on labor income for most taxpayers, increasing the reward for work. Some taxpayers would face increases in effective marginal tax rates because of base-broadening features of the bills.”
The economists believe the individual tax base broadening embodied in the proposals would enhance efficiency by confronting most households with lower marginal tax rates.