Donald Trump’s tax plan will create three million new jobs and 5 percent economic growth in the first year alone, according to an analysis using the NCPA-DCGE dynamic model. But the Trump plan also increases the federal deficit over time. How will these accumulated fiscal imbalances translate into debt burdens for taxpayers into the future?
NCPA scholars analyzed the impact of Trump’s tax and spending plan on the future fiscal health of the United States using the Congressional Budget Office’s (CBO) 2016 Long TermTerm Budget Outlook as the baseline for the period 2016 to 2046. The CBO baseline estimates assume average real gross domestic product growth of 2.1 percent annually over the 30-year period. The projected annual deficits were discounted at 3 percent to obtain a net present value (present value of revenues minus the present value of expenditures) for future debt incurred under the CBO baseline and the Trump tax plan as shown in Table I.
The anticipated revenue from Trump’s tax plan according to Beacon Hill Institute’s NCPA-DCGE model (see line 5):
- Under the proposed Trump tax plan the deficit in 2017 would be $1.4 trillion, or 166 percent higher than under the current law baseline.
- By 2026, the deficit will be $2.6 trillion, and by 2046, nearly $5.1 trillion.
- The present value of future deficits under the Trump tax plan, $53 trillion, is nearly twice the present value of deficits under current law.