WP Explains the Impossible Math of Trump Budget

May 24th, 2017

"What the budget proposal does, Furman said, is include the expected gains from the tax cuts without accounting for the losses. In other words, if the tax plan is revenue-neutral, there would be $2 trillion in additional revenue from economic growth — but $2 trillion less in revenue from reduced tax rates. This proposal skips everything after the dash in that sentence...


Trump’s proposal wasn’t even consistent with the tax plan in broad strokes. 'As I understand it, there’s a page in this budget which shows revenue coming in from the estate tax, which they’ve explicitly planned to repeal,' he said. If it’s repealed, obviously, the amount of revenue coming in from it will be zero.

All of this analysis is predicated on the idea that the tax plan itself would lead to the growth that Trump claims — the stipulation that Hanlon offered above. That stipulation is strongly contested.

Hanlon noted a recent survey of economists by the University of Chicago. Thirty-seven economists weighed in, saying that they didn’t think that Trump’s tax cuts, as loosely introduced, would be revenue-neutral, contrary to the claims of the administration. The two who held the opposing opinion? It turns out that they misread the question. And they were just referring to the idea of a revenue-neutral tax proposal, not the administration’s  prediction of an additional $2 trillion in revenue from out of thin air.


Furman’s view: 'This is not an accidental mistake. This is a mistake that happens to people that have a ludicrously optimistic view of the impact of tax cuts and also don’t bother to actually specify or work out any of the policy details.'"