CNN
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President Donald Trump and congressional Republicans are promising that their sweeping tax and spending cuts package will usher in an era of historic economic growth.
“This is going to be jet fuel,” House Speaker Mike Johnson said on NBC’s “Meet the Press” earlier this month. “The reason we call it the Big, Beautiful Bill is because it is a tremendous pro-growth package entwined in this legislation that is going to make everybody’s incomes go up.”
But a multitude of economic experts across the ideological spectrum doubt that’s going to happen. In fact, many argue that the Trump agenda megabill that narrowly passed the House last month would provide even less economic oomph than his 2017 Tax Cuts and Jobs Act – and the jury is still out on how much economic growth that earlier tax cut package spurred.
While independent estimates vary somewhat, most find that the House-passed package would only give a small nudge to economic growth and fail to offset its trillions of dollars of tax cuts.
The reason: The “Big, Beautiful Bill” wouldn’t provide substantial long-term corporate tax relief, which drives economic expansion.
The Senate version, a portion of which was released Monday, would make several business tax provisions permanent, which would increase the bill’s economic growth potential but also its cost. But the two chambers would still need to hammer out their differences on these and other provisions. And growth estimates for the Senate bill have yet to be released.
The megabill’s main focus is to extend the roughly $4 trillion in TCJA individual tax cuts that are set to expire at the end of this year. The House-passed package would also expand some of the measures, such as a four-year enhancement to the child tax credit, and aims to fulfill several of Trump’s campaign promises, including temporarily eliminating taxes on tips, overtime and auto loan interest.
On the corporate tax side, the package would restore a tax break from the 2017 package that allowed businesses to fully write off the cost of equipment in the first year it was purchased. The incentive has been phasing out since 2023.
Also, the legislation would once again allow businesses to write off the cost of research and development in the year it was incurred. The TCJA required that companies deduct those expenses over five years, starting in 2022.
The two provisions would expire after 2029.
The bill would also allow companies to immediately deduct the cost of constructing or making improvements to certain types of buildings, including manufacturing plants, through 2028.
These corporate tax breaks would prompt businesses to invest and expand in the next few years, but the incentives are temporary and won’t prompt long-term economic growth, said Will McBride, the Tax Foundation’s chief economist.
What’s missing is the massive business tax break – the permanent reduction of the corporate tax rate from 35% to 20% – contained in the TCJA, which some experts argue drove the economic growth in that package.
According to the right-leaning Tax Foundation, the tax provisions in the House-approved bill would boost the economy 0.8% over about three decades – compared to its estimate of 1.7% for the 2017 bill. Increased revenue from economic growth would offset about 22% of the current bill’s tax cuts.
Still, the package would increase the federal budget deficit by $1.7 trillion over 10 years, even taking its roughly $1.5 trillion in spending cuts into account.
“We look at the bill and kind of shrug our shoulders and say, ‘You could have done better on growth’,” said Daniel Bunn, the foundation’s president.
Similarly, the Penn Wharton Budget Model forecasts that the overall House bill would give a 0.4% boost to the economy by 2034, but the deficit would grow by $3.2 trillion over that period. Penn Wharton estimates that the deficit impact would increase when taking the economic effects into account because some lower-income households would reduce their hours worked to requalify for Medicaid coverage and some higher-income people would work less because of their gains from the bill’s tax breaks.
The Trump administration argues that these independent analyses are wrong.
“So called ‘experts’ panning The One, Big, Beautiful Bill, without a smidge of self-awareness, should remember that they made these same exact gloomy predictions about President Trump’s tax cuts during his first term,” Kush Desai, a White House spokesman, said in a statement to CNN, adding that the TCJA “helped usher in historic job, wage, investment, and economic growth.”
The Congressional Budget Office has yet to release its analysis that takes the House package’s economic impact into account. A separate CBO analysis forecasts the bill would increase the deficit by $2.4 trillion over a decade, not accounting for economic growth.
One way to boost the economic growth potential of the package would be to make the business tax breaks permanent, some experts say. The Senate Finance Committee version of the bill calls for making several of the provisions permanent.
For instance, the temporary corporate tax breaks for equipment and for research and development would cost $60 billion over a decade, but making them permanent would increase the price tag to $507 billion, according to the Committee for a Responsible Federal Budget estimate, which was calculated prior to the Senate Finance Committee proposals were released.
Penn Wharton forecasts that making permanent the temporary business tax provisions and other time-limited measures in the House bill would increase the deficit after taking the economic impact into account. Higher levels of federal debt can reduce incentives for private investment, which typically spurs more economic growth.
Providing subsidies for new commitments is a much more efficient way to encourage growth than cutting the corporate rate since companies only get the benefit if they invest, said William Gale, co-director of the Urban-Brookings Tax Policy Center.
“Making the investment provisions permanent would be a pro-growth move relative to almost anything else in the bill,” Gale said, though the increase in deficit and other measures in the legislation could negatively affect private investment.
