Harvard economists: Tax law costs $1.2T after accounting for economic growth

The tax law President Trump signed in December costs about $1.2 trillion over 10 years after accounting for its economic effects, two Harvard University economists with different opinions of the law estimated in a new paper.

The findings in the paper, which is published in a Brookings Institution journal, contrast with claims some Republicans have made that the new law will pay for itself through increased economic growth.

The paper was written by Robert Barro, who has spoken favorably about the corporate part of the law, and Jason Furman, a former Obama administration official who has been critical of it.

The Harvard economists found that the law, as written, would increase gross domestic product by 0.4 percent over 10 years, or increase the annual growth rate by 0.04 percentage points. Accounting for those effects, the law would cost the Treasury Department $1.2 trillion over a decade — compared to the $1.5 trillion cost that the Joint Committee on Taxation estimated before considering economic growth produced by the measure.

If major temporary provisions in the law are made permanent, the law would boost GDP by 1.2 percent over a decade, and the measure’s cost would be $1.7 trillion after accounting for economic effects.