Congressional Republicans are weighing a controversial accounting manoeuvre that could allow them to extend President Donald Trump’s 2017 tax cuts without officially adding to the federal deficit, according to Politico.
The tactic, which is being seriously considered as Republicans grapple with how to fulfill Trump’s tax policy demands, would treat the extension of current tax rates as cost-neutral rather than acknowledging the estimated $4 trillion cost over 10 years calculated by nonpartisan scorekeepers.
The move would enable Republicans to make the tax cuts permanent while avoiding painful spending cuts and adding new tax exemptions for tips, overtime, and Social Security benefits.
Trump is expected to discuss the proposal with members of the Senate Finance Committee at a White House meeting on Thursday. While some Republicans argue that extending current tax rates should not be counted toward the deficit, critics—including prominent GOP budget experts—warn that the move would set a dangerous precedent, opening the door to perpetual deficit spending.
The manoeuvre is particularly appealing to Republicans, as it would solve a pressing political issue. House budget hawks, who oppose adding to the federal deficit, have insisted that tax cuts be offset by spending reductions.
Meanwhile, the 4.5 trillion limit on tax cuts set by the House leaves little room to extend the expiring tax cuts while also accommodating Trump’s additional tax−related requests, which could cost up to 5 trillion, according to the nonpartisan Committee for a Responsible Federal Budget.
Risky political gamble
Critics argue that adopting the current policy baseline would allow either party to disguise trillions in spending through tax policies. Democrats, including Sen. Elizabeth Warren, have also accused Republicans of abandoning decades of anti-deficit rhetoric to enact tax cuts for the wealthy.
They can’t repeal the underlying reality, a $4.7 trillion giveaway to billionaires and giant corporations will cost $4.7 trillion.
Meanwhile, Senate Finance Chair Mike Crapo, the leading advocate for the current policy baseline, argues that the change would correct budget scoring rules that favor higher spending over maintaining low taxes.
If you’re not changing the tax code, you’re simply extending current policy, you are not increasing the deficit. We’ve got to get some kind of sensibility into the way that we score.
However, the move represents a significant political gamble for Republicans. The Senate’s parliamentarian must rule on whether the manoeuvre complies with budget reconciliation rules, which allow certain bills to pass with a simple majority.
