The Trump tax cut plan — at least as outlined in the one-pager released the other day — is highly unlikely to pay for itself. Even using generous dynamic scoring.
While an argument could be made that the 35% top corporate rate puts the US on the wrong side of the Laffer Curve, slashing the rate by more than half and recouping all that lost revenue through higher economic growth … well, seems a bridge too far. I mean, $5 trillion (for the whole plan, such as it is) is a lot of red ink. Nor should we generally expect tax cuts to perform this feat. The 1981 Reagan tax cut didn’t pay for itself. And a 2004 study by two Bush II economists estimated that in the long run, “about 17 percent of a cut in labor taxes is recouped through higher economic growth. The comparable figure for a cut in capital taxes is about 50 percent.”More