Paying for the Tax Cut Free Lunch

Paying for the Tax Cut Free Lunch

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A new report from the Tax Policy Center starts with a simple premise: There’s no such thing as a free lunch when it comes to tax cuts, which are eventually paid for with higher taxes or lower spending. The question is who gets stuck with the bill.

The TPC analysis looks at different ways the cost of the tax cuts could be distributed, which significantly changes the effects of the GOP tax bills. Without considering financing, the House and Senate bills appear to benefit most households, though in a regressive way, since wealthier taxpayers benefit more.

However, when financing is factored in, many households lose out: “Our central finding is that if either bill as written were to become law and plausible ways of financing the bill were taken into account, a significant majority of low-and middle-income households will eventually end up worse off than if the bill did not become law. In other words, they will lose more from the financing mechanisms than they will gain from the tax cuts themselves.”

The analysis comes with many caveats, of course, and does not include the effects of Obamacare mandate repeal or possible reductions in overall entitlement spending. But it does suggest that, as many experts have warned, the long-term costs of the GOP tax bill may be higher than expected.

You can read the full analysis here