The Joint Committee on Taxation estimates that gross domestic product (GDP) will be higher by 0.4% over 10 years under OBBB and that investment will fall slightly. The Tax Foundation estimates that GDP will be 0.8% higher after 30 years and that the capital stock will rise by 0.2%. The Penn Wharton Budget Model finds a similar effect on GDP of 0.7% after 30 years, with a 1.5% rise in the capital stock.
These modest projections make sense. Although the bill would extend the lower statutory tax rates, improving incentives to work and invest, several other features would work in the opposite direction. Higher taxes on homeowner-occupied housing and corporate investment and higher federal borrowing would reduce investment. Furthermore, the temporary nature of the expensing provisions means they will not produce any growth in the long run.
On top of that, the three estimates above may overestimate the economic benefits of the bill and Trump’s broader economic agenda. The Tax Foundation’s estimate, for example, excludes the impact of retaliatory taxes on inbound investment, which would reduce GDP. All three estimates omit the negative impact of reduced immigration and trade tensions. Separately, the Tax Foundation estimates that if President Trump’s tariffs stay in place, it would reduce output by 0.8%, entirely offsetting the OBBBA’s impact on output.
**In contrast, the White House Council of Economic Advisors (CEA) finds the bill would produce significant economic growth. CEA projects the bill would increase GDP by up to 3.5%, raise investment by up to 7.5%, and raise wages by up to $11,600 per worker. They also argue that the OBBBA would boost the economy by up to 5.2% in the first few years after enactment.**
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The Joint Committee on Taxation estimates that gross domestic product (GDP) will be higher by 0.4% over 10 years under OBBB and that investment will fall slightly. The Tax Foundation estimates that GDP will be 0.8% higher after 30 years and that the capital stock will rise by 0.2%. The Penn Wharton Budget Model finds a similar effect on GDP of 0.7% after 30 years, with a 1.5% rise in the capital stock.
These modest projections make sense. Although the bill would extend the lower statutory tax rates, improving incentives to work and invest, several other features would work in the opposite direction. Higher taxes on homeowner-occupied housing and corporate investment and higher federal borrowing would reduce investment. Furthermore, the temporary nature of the expensing provisions means they will not produce any growth in the long run.
On top of that, the three estimates above may overestimate the economic benefits of the bill and Trump’s broader economic agenda. The Tax Foundation’s estimate, for example, excludes the impact of retaliatory taxes on inbound investment, which would reduce GDP. All three estimates omit the negative impact of reduced immigration and trade tensions. Separately, the Tax Foundation estimates that if President Trump’s tariffs stay in place, it would reduce output by 0.8%, entirely offsetting the OBBBA’s impact on output.
**In contrast, the White House Council of Economic Advisors (CEA) finds the bill would produce significant economic growth. CEA projects the bill would increase GDP by up to 3.5%, raise investment by up to 7.5%, and raise wages by up to $11,600 per worker. They also argue that the OBBBA would boost the economy by up to 5.2% in the first few years after enactment.**
“Growth?”
– Republicans