Politics, Moderate



This tax reform thing won't be as easy as Republicans think

Catherine Rampell on

Based on the vague contours we have, the Republicans' tax plan is expected to cost about $2.4 trillion over the coming decade, according to a preliminary analysis by the nonpartisan Tax Policy Center. Unfortunately for Republicans, their final bill is allowed to cost "only" $1.5 trillion over the next decade, at least to pass with a simple majority vote in the Senate. That's the maximum deficit increase allowed under the Senate budget resolution approved last week.

Fitting a $2.4 trillion peg into a $1.5 trillion hole will be tricky. Proposals to cut the corporate income tax rate to 20 percent and repeal the corporate alternative minimum tax alone cost $2 trillion, according to the Tax Policy Center. Republicans will have to find more offsets, or make the cuts less generous, or both.

If anything, however, Republicans seem inclined to increase the cost of their bill, not decrease it. That's because they're losing their nerve on the few major revenue raisers they've included, such as ending the state and local tax deduction.

If they attempt to close other deductions and loopholes, more interest groups and lobbyists will descend on Gucci Gulch and demand that those pet provisions be protected, too.

As a result, Republican lawmakers are even more likely than usual to deploy budgetary gimmicks, such as ludicrous-speed economic growth or pretending that a corporate tax break will expire in five years when everyone knows it will be renewed.

There's potentially an even bigger problem for getting this tax cut through. It has to do with a relatively obscure law, called "statutory PAYGO," that hasn't gotten much attention.

This legislation has been on and off the books (it's been on since 2010) since 1990. It says that if all of the bills passed by the end of the current calendar year have the net effect of increasing deficits, then automatic, immediate, offsetting cuts to certain non-discretionary spending programs -- including (yikes) Medicare -- go into effect.

Here's how it would work.

If Congress successfully passes a $1.5 trillion tax cut before going home for Christmas, $28 billion would get automatically slashed from Medicare between January and September of next year. And that's just in Medicare. Other popular programs, such as mandatory spending on student loan administration and farm subsidies, would be wiped out entirely, according to the Committee for a Responsible Federal Budget.

Sponsored Video Stories from LifeZette

And such cuts would continue for a decade. Not exactly a people-pleaser.

The point of this law is (in theory) to stop Congress from doing fiscally irresponsible things. As with most of its hand-tying exercises, Congress can always override this automatic sequester, as they did when passing the Bush tax cuts in 2001.

But here's the key: A bill to override these cuts would require 60 votes. Meaning at least a handful of Democrats would be needed to pave the way for tax cuts after all.

Republicans seem to believe they can get the votes by threatening to cast Democrats as killing Medicare. But what's to stop smart Democrats from pointing out that Republicans put Medicare at risk in the first place?


Catherine Rampell's email address is crampell@washpost.com. Follow her on Twitter, @crampell.

(c) 2017, Washington Post Writers Group


blog comments powered by Disqus

Social Connections


Signe Wilkinson Clay Bennett Ken Catalino Steve Benson Nick Anderson Andy Marlette