Could tax cuts in 2017 be quite significant?

Table 1: hypothetical 2017 Party tax cuts, $1.5 billion

Current tax rate New tax rate Revenue loss,
static scoring
Revenue loss,
dynamic scoring
33% 31.5% $323m $274m
30% 27.5% $388m $329.4m
17.5% 16.5% $505m $429.3m
Trust tax 33% Trust tax 31.5% $135m $129m
Company tax rate 28% 27.5% $113m $90m
Total cost $1.465b $1251m

Jim Rose models a possible $1.5 billion tax cut package in 2015. This is made possible by keeping the new spending for this year and next to $1 billion instead of $1.5 billion.

He notes:

No serious participant in public debate could suggest that tax cuts of the size in table 1 will not have incentive effects that will lead to growth in incomes and business profits. There will be offsetting tax revenue increases that make a more ambitious tax package possible in 2017.

Using dynamic scoring, Rose calculates we could afford to do the following:

  • tax rate down 2% to 31%
  • Upper Middle tax rate down 3% to 27%
  • Middle tax rate down 1% to 16.5%
  • Trust tax rate down 2% to 31%
  • Corporate tax rate down 1% to 27%

That would see someone earning $70,000 have their tax drop by $1,000 or $20 a week.

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