Goldman Sachs says that the larger tax reduction will not compensate for the tariff for economic growth

A new report presented Goldman Sachs It finds that although the Republican tax reduction package in the House of Representatives that move through the reconciliation process reduces taxes more than before, it is still not enough to compensate for economic growth resulting from customs tariffs.

Economists in Goldman Sachs, led by Jean Hatzius, indicated in the report on Monday that the proposal Tax discounts More than expected, about 0.1 % to 0.2 % of GDP (GDP) over the next few years.

The report said that some of the provisions related to tax cuts from 2017, which are scheduled to be expired at the end of this year, unless they are extended, are slightly generous than expected, while the reduction of pure business tax is slightly smaller with re -investment and completion by less executions of green programs.

They wrote: “Individual income tax discounts and investment incentives in business in the financial package suspended in the House of Representatives must have a positive impact on growth in 2026 and 2027.” “However, just as the revenue gains increase from customs tariffs more than compensating for the net increase in deficit (compared to the current level) of the household financial package, the strike to growth from the customs tariff will compensate more than reinforcement to growth from the financial package.”

MOODY reduced credit rating for us: What does that mean?

Definitions are also presented in the total financial expectations regarding the tax cutting package through the generation of revenues, although the customs tariff revenues are not included in the estimation of the draft law that will be produced by the Congress Budget Office. Customs duties are taxes On imports paid by importers, who notice that economists often pass higher costs for consumers through higher prices.

The analysis found that although the tax package will increase the budget deficit by about 0.4 % of GDP compared to the current policy in the next few years, it is possible that the customs tariff revenues will exceed this difference.

Economists wrote that “goods imports in 2024 amounted to approximately 11 % of GDP. Assuming that goods imports are almost proportional to an increase of 13 (percentage point) in the customs tariff that we assume, tariffs must raise about 1.25 % of gross domestic product, or about $ 400 billion in FY2026.”

However, they pointed out that “the total increase in federal revenues will be somewhat smaller, as we reduced expectations for other returns slightly as a result of growth from the definitions.”

The Central Bank of Oman says that the budget deficit in the United States to expand the scope of the national debt to 156 % of GDP

It caused the constant budget deficit in the total National debt To increase 36 trillion dollars and the three major credit rating agencies have pushed the United States level from the highest highest over the past fifteen years, with a political imbalance around the debt limit to reduce spending in movements.

S&P reduced the United States Credit classification From AAA to AA+ in 2011 amid a dilemma that limits debt, while Fitch Ratings released a reduction in the same range in August 2023, noting that “governance erosion” about debt management. On Friday, Moody’s released its own reduction, cut the USA from the highest level of AAA down Rung to AA1 due to deficit expectations.

MOODY reduces the American credit rating on the height of debt

The Goldman Sachs report also said that Modi’s move “seems to be affected by the suspended financial package.”

“Although we do not believe that the reduction will force any of the cabinet leaves to sell, it highlights the deteriorating financial stores and comes at a time when the markets are already heading with the financial risks,” said Goldman. “However, the expected Moody’s Moody’s 9 % of GDP deficit in 2035 is about 2pp larger than our.”

The budget deficit, as a percentage of GDP, is a common measure of financial comparison with the size of the economy. Last year, in the fiscal year 2024 for the federal government, the deficit was 6.4 % of GDP, an increase of 6.1 % in the fiscal year 2023 and 5.3 % in the fiscal year 2022.

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The peak of the epidemic era reached 14.7 % in the fiscal year 2020 amid an increase in relief measures, while the record ever is 26.9 % in 1943 with the outbreak of World War II.