According to CBO’s and the staff of the Joint Committee on Taxation’s (JCT) estimates, enacting H.R. 1 would reduce revenues by about $1,649 billion and decrease outlays by about $194 billion over the period from 2018 to 2027, leading to an increase in the deficit of $1,455 billion over the next 10 years. Those estimates do not incorporate the effects of macroeconomic feedback.
Summary of the Legislation
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; repeal deductions for personal exemptions; repeal or limit certain itemized deductions; and increase the exemption amounts for the individual 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 2018, it would replace the structure of corporate income tax rates, which has a top rate of 35 percent under current law, with a single 21 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 $1,649 billion and decrease outlays by $194 billion over the 2018-2027 period. As a result, the bill is estimated to increase the deficit by $1,455 billion over the next 10 years, excluding effects from macroeconomic feedback. 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 $1,482 billion over the period from 2018 to 2027. 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.
Because of the magnitude of its estimated budgetary effects, the bill is considered major legislation as defined in sections 4107 and 5107 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 extent practicable, include the budgetary impact of the bill’s macroeconomic effects. It is not practicable to provide an estimate of the budgetary impact of the bill’s macroeconomic effects at this time.
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).