As discussions intensify on Capitol Hill over reupping President-elect Donald Trump’s signature tax cuts, Republicans are headed for a massive fight over what could be a nearly $5 trillion price tag.
He proposed during his campaign trillions in additional tax cuts on top of the ones enacted during his first administration.
And the figure they choose will go a long way toward determining which of the myriad tax cuts under consideration can be accommodated.
That is pitting him against fellow Republicans like Crapo who adamantly oppose paying for their tax cuts.
“Look at history — were the Bush tax cuts paid for?” he said.
Republicans are in the midst of a fierce battle over President-elect Donald Trump’s signature tax cuts, which could cost them close to $5 trillion, as talks on Capitol Hill heat up.
Prominent members of the House and Senate disagree sharply about what, if anything, should be done to address the budgetary impact of extending the numerous tax breaks that benefit millions of Americans and are scheduled to expire at the end of next year.
In the face of growing federal red ink, some, like House Budget Committee Chair Jodey Arrington (R-Texas), are adamant that the endeavor should not increase the deficit. Leveraging the excitement surrounding Elon Musk’s proposal to reduce spending, they contend that there are numerous ways to reduce the budget in order to cover the expenses. Removing green energy tax breaks, increasing taxes on corporations’ foreign profits, and reducing Medicaid are some of the options.
Legislators like Sen. The Senate Republican point man on taxes, Mike Crapo of Idaho, has long opposed bearing a large portion of the expense of any tax deal.
Trump, whose viewpoint will have significant influence, doesn’t appear to care about the price. In addition to the tax cuts implemented during his first administration, he suggested trillions more during his campaign. He is suggesting that they be paid for with money collected from import duties.
The discussion will probably unfold over the next few months and could affect not only taxes but also a number of other policies. For Republicans to employ the mysterious “reconciliation” process, they must put aside their differences. It would enable them to overcome a Senate Democratic filibuster and enact tax, immigration, and energy reforms, they hope.
“The conference’s biggest challenge will be that,” Rep. The R-Fla. Greg Steube. ), a member of Ways and Means, regarding the impending budget conflict with the GOP.
The goal is to have a draft tax plan ready in January, so House Ways and Means Committee Republicans are meeting with staffers every two weeks. When Trump takes office in January, top aides to the leadership of the House and Senate are also squatting to prepare for the start. 19.
The amount, if any, that GOP lawmakers’ tax bill can contribute to the deficit will need to be specified. And the number they select will have a significant impact on which of the numerous tax cuts being considered can be implemented.
When the current tax cuts were implemented in 2017, it took months for lawmakers to agree on the $1.05 trillion ceiling.
The numbers are all far worse today. It is currently estimated that renewing about 40 provisions that are about to expire will cost $4 trillion, plus an additional $600 billion in interest expenses.
Concurrently, the federal debt has almost doubled since 2017, and the rise in interest rates has made debt payments much more difficult. It now costs nearly $1 trillion a year to service the debt.
According to Arrington and other prominent House Republicans, the tax bill they are putting together shouldn’t make those financial issues worse.
“We have all these opportunities to address the deficit, so there’s no reason for us to do that,” Arrington, whose committee is essential to the reconciliation process, stated.
“Rep. “We need to advance the agenda that the president ran on — he has a mandate — but we should be mindful of making sure that there are corresponding cuts or corresponding tax changes to ensure that we are deficit neutral,” said Chip Roy (R-Texas), policy chair of the House Freedom Caucus. “.”.
“Under no circumstances should we simply declare, ‘Here is the policy,’ without considering how it will affect the deficit. “.”.
Among the possible payoffs are tariff hikes, food stamp spending cuts, and so-called dynamic scoring, which accounts for tax revenues from the anticipated growth in the economy brought about by legislation.
There are other, unconventional options as well, according to Arrington, who contends that Republicans should be able to include income from the economic boost that results from lowering regulations—something that is currently not included in the congressional budgeting process.
That puts him up against other Republicans who are adamantly against paying for their tax cuts, like Crapo. They claim that trying to find the trillions of dollars in savings that would be required to pay for their tax plans is neither necessary nor realistic.
According to Crapo, neither existing legislation nor what he refers to as “pro-growth” initiatives should be obliged to pay for anything that is extended.
That leaves new tax proposals that aren’t pro-growth as needing offsets. This vague category may contain at least some of Trump’s solutions, though Crapo wouldn’t specify what kinds of ideas would fall under that heading.
“I won’t begin analyzing his suggestions,” Crapo declared. “All I can offer you are the fundamentals. “”.
His House counterpart, Jason Smith (R-Mo.), is the chair of the Ways and Means Committee. also seemed doubtful that lawmakers would foot the bill for all of their tax breaks.
He remarked, “Look at history — were the Bush tax cuts paid for?”.
The cost issue is further complicated by GOP lawmakers’ frequently exaggerated expectations for dynamic scoring and Republicans’ mistrust of Congress’ impartial budget scorekeepers.
Phill Swagel, the current director of the Congressional Budget Office and a former Treasury official in the George W. Bush administration, agrees that the forecasters do not sufficiently account for the anticipated economic benefits of tax cuts. Republicans appointed him to the position during the Bush administration.
The CBO previously stated that the TCJA would generate enough additional tax revenue to cover 20% of the cost; however, Swagel has cautioned that this will be hard to replicate because it was based on the law’s 14 percentage point corporate tax rate cut. That kind of thing isn’t being considered right now.
Some legislators are using their own dynamic analyses, which are off-menu. Sen. Cassidy Bill (R-La. ), another tax writer, says he thinks the TJCA created so much economic activity that it nearly paid for itself, even though official projections didn’t say that. He claims that if they only extend that law, it will also be largely funded.
He remarked, “That’s frequently not appreciated.”.
