Congress Grapples with Fiscal Impact of Extending Trump’s Tax Cuts

WASHINGTON — A seemingly minor but significant accounting issue has ignited a new conflict in Congress, as Republicans strive to implement President Donald Trump’s extensive tax cut plans.

Senate Republicans are seeking to alter the method used to calculate the impact of extending many of Trump’s 2017 tax cuts on future federal deficits. The Congressional Budget Office estimates that extending these cuts would increase deficits by nearly $4 trillion over the next ten years.

Democrats are accusing Republicans of breaking Senate protocol with this action. Senate Democratic leader Chuck Schumer, D-N.Y., claims Republicans are resorting to extreme measures that undermine the institution’s rules.

This debate has major consequences for Trump’s agenda and the nation, with pending policy decisions capable of determining America’s economic and budgetary future for years to come.

So, what’s the heart of the dispute?

Why lawmakers keep talking about the baseline

Republicans aim to draft their bill using a “baseline,” or starting point, that suggests no effect on the deficit.

This baseline would assume that Trump’s 2017 tax cuts will continue regardless of their expiration date, essentially treating their renewal as having no cost. Furthermore, Republicans plan to proceed without a ruling from the Senate parliamentarian on whether the scoring change adheres to the guidelines for passing tax cut bills with a simple majority.

“They are deciding that the way we’re going to do this is to break the Senate and make up our own rules,” said Sen. Cory Booker, D-N.J., during a Senate floor speech that lasted over 25 hours to protest Trump’s agenda. “This is how they are going to get a bill through that gives trillions of dollars in tax cuts to the wealthiest in the country.”

This accounting change makes it easier for Republicans to make the tax cuts permanent as they attempt to push a bill through this year. However, it also highlights how tax cuts, as well as spending, have historically been prioritized over deficit reduction in legislative matters, resulting in increased government borrowing and a national debt that now exceeds $36 trillion.

The arguments for and against the change

Some of the most influential groups in Washington are advocating for the accounting change.

Numerous well-funded trade and business organizations argue that creating a path for making the 2017 tax cuts permanent would provide the certainty and stability that companies require to foster growth and productivity.

“Americans should not have to worry about their tax relief expiring every few years,” said Senate Majority Leader John Thune, R-S.D.

Meanwhile, fiscal watchdogs are raising concerns.

“I think this should be rejected by any fiscally responsible member of Congress,” said Michael Peterson, chairman and CEO of the Peter G. Peterson Foundation, a debt watchdog group. “It’s a blatant attempt to get around one of the few rules we have that protects the next generation and our fiscal future.”

How it all relates to the Senate’s filibuster

Republicans are seeking to pass Trump’s tax cut package with a simple majority, which is typically not possible in the Senate, where most legislation needs 60 votes to pass.

However, the process for avoiding a Senate filibuster involves certain rules, including a limit on increasing the deficit beyond a specific timeframe, usually 10 years. Republicans opted to sunset significant portions of the 2017 tax cuts after only eight years to meet this requirement.

The Senate parliamentarian generally determines whether legislative proposals comply with the rules for legislation that isn’t subject to a filibuster. However, in this instance, Republicans contend that Senate Budget Committee Chairman Lindsey Graham, R-S.C., has the authority to decide which baseline is used to assess the bill’s cost.

Schumer expressed strong disapproval of the GOP’s approach.

“By ignoring the parliamentarian, Republicans are going nuclear,” Schumer said Wednesday. “They’re trampling all over rules that have governed the Senate for decades in order to give massive tax breaks for their billionaire friends.”

The issue was also discussed at the White House when Trump met with Republican senators.

“We explained to him that we no longer need a ruling from the parliamentarian, that we can do it through the authority of the Budget chairman,” said Sen. John Kennedy, R-La. “We told him undoubtedly the Democrats will challenge it. We will win.”

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, points out that under the standard procedure, lawmakers must fully offset the cost of the tax cuts in the long term, or the bill’s provisions will expire. She said the scorekeeping change would allow Congress to ignore the cost of the proposed extension, which would reduce the pressure to offset the extension’s cost.

“It’s an accounting gimmick that would make  executives blush,” she said.

A different approach in the House

House Republicans, in their budget plan, operated under the assumption that the tax cuts do have a cost, which they attempted to partially offset with at least $2 trillion in spending cuts.

It remains unclear whether House Republicans will agree with the Senate’s change. House Budget Committee Chairman Jodey Arrington of Texas has stated that he would be open to the Senate’s proposal if certain conditions are met.

“What I would hate to see happen is for a product to come from the Senate that has all the tax cuts that any Republican in the Senate could desire under any circumstance, but none of the hard decisions to rein in the spending that is driving us off a fiscal cliff,” Arrington said.

Critics of the scorekeeping change also caution that Republicans may not appreciate the precedent they are setting should Democrats regain the majority. Peterson described it as a “foundational change” akin to eliminating the filibuster, “and setting a dangerous precedent that could be abused by both parties in the future.”

He said that, in the same way that Republicans are seeking to make temporary tax cuts permanent, Democrats could aim to make new spending permanent.

“Both of which would add materially to the debt and circumvent longstanding traditions and actual rules that are in the budget process today,” Peterson said.

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