Title I would amend numerous provisions of U.S. tax law. Among other changes, the bill would reduce most income tax rates for individuals and modify the tax brackets for those taxpayers; increase the standard deduction and the child tax credit; and repeal deductions for personal exemptions, certain itemized deductions, and the alternative minimum tax. Those changes would take effect on January 1, 2018, and would be scheduled to expire after December 31, 2025. The bill also would permanently repeal the penalties associated with the requirement that most people obtain health insurance coverage (also known as the individual mandate).
Title I would also permanently modify business taxation. Among other provisions, beginning in 2019, it would replace the structure of corporate income tax rates, which has a top rate of 35 percent under current law, with a single 20 percent rate. The legislation also would substantially alter the current system under which the worldwide income of U.S. corporations is subject to taxation.
Title II would direct the Secretary of the Interior to implement an oil and gas leasing program for the coastal plain of the Arctic National Wildlife Refuge (ANWR) and would affect oil and gas leases and the Strategic Petroleum Reserve.
Effects on the Federal Budget
CBO and JCT estimate that enacting the legislation would reduce revenues by about $1,633 billion and decrease outlays by $220 billion over the 2018-2027 period, leading to an increase in the deficit of $1,413 billion over the next 10 years (see Table 1). A portion of the changes in revenues would be from Social Security payroll taxes, which are off-budget. Excluding the estimated $27 billion increase in off-budget revenues over the next 10 years, the legislation would increase on-budget deficits by about $1,440 billion over the period from 2018 to 2027 (see Tables 1 and 2). Pay-as-you-go procedures apply because enacting the legislation would affect direct spending and revenues.
JCT provided virtually all estimates for the provisions of the bill. However, JCT and CBO collaborated on the estimate of the provision that would eliminate the penalties associated with the individual mandate, and CBO estimated the effects of the oil and gas provisions.
Long-Term Effects on the Budget
CBO and JCT estimate that enacting the legislation would not increase on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2028, and would not increase net direct spending by more than $2.5 billion in any of those same 10-year periods.
Macroeconomic and Distributional Effects
Because of the magnitude of its estimated budgetary effects, the Tax Cuts and Jobs Act is considered major legislation as defined in section 4107 of H. Con. Res. 71, the Concurrent Resolution on the Budget for Fiscal Year 2018. It therefore triggers the requirement that the cost estimate, to the greatest extent practicable, include the budgetary impact of the bill’s macroeconomic effects, and also include, to the extent practicable, the distributional effects across income categories. It is not practicable to provide an estimate of the budgetary impact of the bill’s macroeconomic effects at this time. In addition, the distributional effects are not appreciably different from the effects estimated for the Reconciliation Recommendations of the Senate Committee on Finance, which were ordered reported on November 16, 2017.
CBO and JCT have determined that the provisions of the legislation contain no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA).