Will the GOP Tax Plan Stall in the Senate?

Will the GOP Tax Plan Stall in the Senate?


Majority Leader Mitch McConnell said Tuesday that Senate Republicans will release their version of the tax bill on Friday.

Republicans plan to pass their tax bill through the upper chamber with a simple majority vote using the reconciliation process, but if the Senate bill is anything like the House’s Tax Cuts and Jobs Act, it will face a serious problem: The House bill in its current form violates the so-called Byrd Rule, which states that legislation passed through reconciliation cannot increase the deficit beyond the fiscal budget window, which in this case is 10 years, or 2027.

Calculations by the nonpartisan Committee for a Responsible Federal Budget show that the House version of the tax bill will increase the deficit by $155 billion in 2028. That projected deficit would allow any senator to use the Byrd Rule to block the bill.

Annual Increase in Deficit - CRFB

What can Republicans do? CRFB says the tax writers have two broad options: 1) make some of the tax cuts expire in 2027; or 2) write a “fiscally responsible” bill that doesn’t need to resort to gimmicks like sunsetting problematic components.

Tax cuts that expire wouldn’t be new — some of the George W. Bush tax cuts from 2001 and 2003 were designed to expire after 10 years, though they were eventually extended, with some becoming permanent and others finally coming to an end in 2012. (Indeed, many critics believe that such cuts are “temporary” in name only, designed to be extended once the 10-year window is up. House Republicans are making similar arguments about the expiration of their proposed family tax credits right now.) But the CRFB points out that temporary tax cuts, especially on the corporate side, could fail to produce much of the growth that Republicans are relying on to make up for their revenue losses, and might even produce negative effects as companies fail to invest in long-term capital enhancements. 

The alternative, according to CRFB, is to avoid the need for sunsets by using the bill to reduce the deficit. Options include the usual but always politically difficult suspects: eliminating more tax breaks, shrinking the size of the tax cuts, cutting spending, and a host of smaller but cumulatively significant tweaks that could help stabilize revenues and outlays.

Senate Republicans will let us know if they’ve heeded that advice later this week — and if not, how they plan to get around the potentially ruinous requirements of the Byrd Rule.