The Joint Committee on Taxation released a report showing the House tax reform proposal would increase gross domestic product by about 0.7 percent on average over the next decade.
"In general, tax policy affects economic growth by changing incentives for owners of capital to invest and for potential workers to supply labor to the economy, and by changing the after-tax rates of return‐either directly by changing the amount of payments going to taxes, or indirectly, by changing aggregate demand, which can change gross payments for output," the committee explains.
"The projected increase in GDP during the budget window results both from an increase in labor supply, in response to the reduction in effective marginal tax rates on wages, and from an increase in investment in response to the reduction in the after-tax cost of capital."
Critics of the plan argue that because the committee estimates that revenue will decline from about $1.5 trillion to $1 trillion, the plan does not pay for itself.