With the passage of the "Tax Cuts and Jobs Act" (TCJA), Congress has a new base from which to plan its spending priorities.
Through analyzing existing revenue projections and making some reasonable assumptions as to likely extensions of policy, we can help create a new “current policy” baseline that adheres more closely to realistic projections of both revenue and congressional action that might impact it.
- Starting with the Congressional Budget Office's pre-TCJA baseline, and adding the Joint Committee on Taxation's (JCT) analysis of TCJA's revenue impacts, the chart above illustrates the federal government's revenue outlook for the next decade.
- By extending the provisions that are currently set to expire in the TCJA (excluding expensing), and including JCT's score with macroeconomic feedback, we have constructed a more accurate baseline to help inform congressional decisions on spending.
- Congress has an additional $353 billion worth of spending restraint to pursue in the next decade if it wishes to both extend tax relief and prevent additional deficit impact, a task that shouldn’t prove exceptionally difficult given that this amounts to barely more than 0.8 percent of revenue.
- The Tax Foundation's dynamic score of TCJA sees more robust economic growth than JCT's modeling, which would significantly change the revenue outlook.
Read more at Constructing a Current Policy Baseline After Tax Reform.