Efforts to Increase US Economic Growth

This option combination would encourage long-run economic growth in the United States by repealing tariffs imposed on US imports since 2017 and replacing the corporate income tax with a destination-based cash flow tax. By reducing marginal tax rates on work and investment, both policies would encourage greater long-run economic output. This combination also increases federal revenue via a border adjustment tax and flipping the tax treatment of interest to disallow interest deductions and ignore interest income.

On a conventional basis, this option would decrease the primary deficit by $1,029.3 billion over the budget window. Long-run GDP would increase by 1.6 percent, and long-run GNP would increase by 2.3 percent. On a dynamic basis, the primary deficit would decrease by $1,247.2 billion from 2027 through 2036, $218 billion more than the conventional estimate. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be lower than the current law baseline, reaching 154.3 percent by 2056.

On average, taxpayers would see a 0.7 percent decrease in their after-tax incomes in 2027. All income groups would initially see decreases in after-tax income. However, by the end of the budget window, the top 1 percent would see an increase. In the long run, taxpayers would see a 0.4 percent increase in after-tax incomes after accounting for economic growth, concentrated within the top 40 percent of households.