Ministry of Finance: Tax reform will bring about US$1.8 trillion in additional revenue in the next 10 years

Ministry of Finance: Tax reform will bring about US$1.8 trillion in additional revenue in the next 10 years [Overseas Chinese News reporter Xu Yifan reported from Washington on December 11] December 11...

[Overseas Chinese News reporter Xu Yifan reported from Washington on December 11] On December 11, the U.S. Treasury Department released an analysis report on the Senate tax reform plan. The report states that tax reform will bring US$1.8 trillion in additional fiscal revenue to the United States over the next 10 years. U.S. GDP growth may reach 2.9%. The tax reform plan can not only make up for the loss of fiscal revenue caused by tax cuts but also bring additional benefits. Treasury Secretary Steven Mnuchin emphasized that tax reform will bring considerable long-term revenue to the U.S. government.

>Treasury Secretary Mnuchin

The report released by the Treasury Department today is a summary analysis of the Office of Tax Policy (OTP) tax revenue expectations combined with the government's economic growth initiatives. Based on expected growth, the Senate tax reform package will bring in $1.8 trillion in additional fiscal revenue over 10 years. Mnuchin said this analysis shows the impact of the government's economic agenda on revenue; the government is committed to stimulating growth with tax reform and broader economic policies, which will bring significant long-term revenue to the government.

The Treasury Department’s Tax Policy Office modeled the Senate’s tax reform package and conducted a static analysis similar to that of the Congressional Joint Committee on Taxation (JCT); tax reform would reduce revenue by $1.5 trillion under current law and $1 trillion under current policy. The difference between these two numbers is because there are elements of the current law that are about to expire, but current policy is likely to bring these laws up to date so they remain in effect.

>OTP simulates the impact of higher growth on revenue. According to estimates in the fiscal year 2018 budget, the average annual growth rate of government revenue over the 10 years is 2.9%; OTP compares this figure with the previously estimated baseline growth rate of 2.2%. The Ministry of Finance believes that half of this 0.7% increase in growth will come from changes in corporate tax; the other half is expected to come from changes in pass-through taxation and personal tax, as well as management reforms, infrastructure development, welfare reforms, etc. mentioned in the 2018 Budget.

The Treasury Department stated that this 0.7% additional growth rate will bring in additional fiscal revenue of $1.8 trillion over 10 years. Subtracting the $1.5 trillion revenue reduction caused by tax reform under current laws, there will be an increase of $30 million in revenue. The increase in revenue here will come mainly from the next five years; because the extra spending creates growth in the first few years, taxes are delayed.

The Ministry of Finance admitted that the growth forecasts given by different economists are different. According to OTP forecasts, if additional GDP growth reaches 0.35% per year, additional fiscal revenue will be approximately US$1 trillion. At the same time, JCT and OTP believe that the benefits brought by the House tax reform plan will not be much different from those in the Senate.