A Comparison of Tax Policy Center and Tax Foundation Analyses of Jeb Bush’s Tax Plan

December 9, 2015

Yesterday, the Tax Policy Center released their analysis of Governor Jeb Bush’s tax reform plan. They found that if the plan were enacted in 2017, it would cut taxes by $6.8 trillion over the following ten years. They also find that the plan would cut taxes for all income groups, but the largest increase in after-tax income would go to the top taxpayers. In their analysis they did mention that the plan would reduce marginal tax rates on both labor and capital, which could lead to a larger economy, but they did not attempt a full dynamic analysis.

We too found that the Bush plan would result in a net tax cut over the next decade. We also found that the plan would result in an increase in after-tax incomes for taxpayers in all income groups. In fact, our distributional tables are very similar to theirs (besides the fact that we break them down by decile and they break theirs down by quintile).

A notable difference between our analysis and TPC’s is that their ten-year revenue estimate is approximately 85 percent larger than ours. We estimated that if the plan were in place in 2015, the total loss in revenue over the next decade would be $3.66 trillion. Theirs, as stated above, is $6.8 trillion.

Fortunately, their analysis was very transparent and it is actually pretty easy to determine where this difference comes from. In fact, they devoted a portion of their paper to reconciling the differences in our estimate and theirs.

First, there were a number of provisions we didn’t model due to either sufficient uncertainty about the details, or limitations with our model. TPC modeled these and, in some places, made assumptions about how they would work. For example, moving to a territorial tax system may have a positive or negative revenue impact depending on which rules are enacted, behavioral assumptions, and the overall rate at which the U.S. taxes corporate income. The Treasury has stated that the switch could either lose up to $130 billion or raise $76 billion over a decade. Without specifics from the campaign, we felt it was best to leave it out. (As a note: it seems as though TPC chose territorial estimates at the high-end of the cost range. They estimated that it would cost about $160 billion over ten years). Other provisions we couldn’t model included the ability for second-earners to file as singles.

TPC estimated that those provisions explain $900 billion in the difference between our estimates.

Second, TPC’s revenue estimate assumed that the Bush plan is put in place in 2017. We estimated the cost as if the plan were in place in 2015. This is has an impact on the total cost, because nominal GDP will be higher in the future, so tax cuts enacted in the future will look larger in nominal dollars. If we were to model the Bush plan as if it were enacted in 2017, our cost figure would increase by $400 billion.

Lastly, it seems as though TPC’s estimate of Bush’s plan in the first decade includes significant transitional costs that disappear over the long-run. In other words, some provisions may have an up-front cost that is larger than their long-term cost. For example, if you move to full expensing, there is a transitional cost as businesses take both partial deductions for existing capital investments from the previous regime and the full cost deductions of new capital investment. This makes full expensing look expensive in the early years. But after a number of years, the transitional cost will dissipate and full expensing will have a much lower steady state cost.

TPC’s revenue estimates show this clearly. According to their revenue tables, moving to full expensing, plus eliminating the interest expense deduction would lose $1.5 trillion over the next decade. However, by the next decade, these provisions would actually raise nearly $500 billion when full expensing has fully phased it. Without full knowledge of their assumptions about the transition to expensing, it is hard to tell if this is an overstatement of its costs in the near term.

As our analysis from September states, we did not estimate this, or other transitional costs. As such, our estimate of full expensing plus the elimination of the interest deduction was much closer to TPC’s second-decade estimate of those two proposals, which we estimate would raise $500 billion.

Overall, these three pieces account for 100 percent of the difference in our static revenue estimate and TPC’s. If you add back these three pieces, our deficit number would be very similar. The remaining $200 billion difference is likely due to smaller micro-dynamic assumptions TPC made that we didn’t or other differences in our models.

TPC and Tax Foundation Static Revenue Estimates

Our Estimate


Enacting plan in 2017


Omitted Provisions


Expensing Transition




TPC Estimate


As stated before, TPC’s distributional tables confirmed our earlier findings (I converted our decile table to quintiles for easy comparison). In September, we found that across all taxpayers, after-tax income would increase by approximately 3.3 percent on a static basis. They found an increase of 4 percent. We found an increase in after-tax income for the top one percent of 11.6, they found an increase of 11.9 percent.

TPC did not conduct a dynamic distributional analysis.

Comparison of Distributional Analyses

Effect of Tax Reform on After Tax Income Compared to Current Law (Fully phased-in)






by Quintile

0% to 20%




20% to 40%




40% to 60%




60% to 80%




80% to 100%




99% to 100%








Source: Tax Foundation Taxes and Growth Model, Tax Policy Center

We think it is important that multiple groups estimate the impact of different tax plans. It provides needed information to taxpayers on how plans will impact them and the government’s finances. Unfortunately, the one piece missing from TPC’s analysis is the most important: the tax plan’s impact on the overall economy and how the translates into costs or benefits for taxpayers and the government. The level of taxation and who pays is important, but so is the structure of a tax system. A tax code that reduces marginal tax rates on workers and investors will lead to a larger economy in the long run. This, in turn, will impact the government’s revenues. Everyone would benefit if TPC were to add to the chorus of groups that analyze tax policy while considering economic impacts.

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