Faced with the task of financing a $4.5 trillion extension of the 2017 Tax Cuts and Jobs Act, Republican lawmakers are considering using an unconventional accounting tactic that would change the price tag from $4.5 trillion to zero dollars.
Congressional tax writers and GOP leaders met Tuesday to begin hammering out a compromise budget resolution funding President Donald Trump’s border, defense, and tax policies. Both chambers need to pass the same budget resolution before moving forward in the budget reconciliation process.
Due to the deficit impacts of extending the expiring tax cuts, Senate Republicans want to scrap “current law” baseline and instead use “current policy” baseline, which treats renewing the TCJA as an extension of current law rather than new policy.
This would make the House’s $4.5 trillion budget resolution, in theory, cost zero dollars rather than trillions.
To offset their resolution, House Republicans had originally planned to raise the debt ceiling by $4 trillion, cut $2 trillion in other federal spending, and assume that the extension will add $2.6 trillion in economic growth.
But Senate Republicans, skeptical of these promises and itching to implement Trump’s agenda as soon as possible, forged ahead with their own, fully offset $342 billion budget resolution that saves the tax cut extension for a later date.
After Trump endorsed the House version, Senate Majority Leader John Thune, R-S.D., said the Senate would keep its version as a “backup plan” while working with the House to make the $4.5 trillion resolution more doable.
The Senate is wary of voting on a costly conforming resolution until the House either proves it can find $2 trillion in harmless spending cuts, or decides to use current policy baseline.
House Speaker Mike Johnson, R-La., has seemed to come around to the idea, telling reporters that switching to the current policy baseline to finance the tax cuts “makes a lot of sense to me.”
But almost every tax and budget organization is calling the method a “gimmick” that would explode America’s national debt for decades to come.
The Congressional Budget Office, the Tax Foundation, and the Committee for a Responsible Federal Budget all agree the TCJA extension will decrease tax revenue for the federal government by at least $4.5 trillion from 2025 through 2034.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, called the current policy baseline a “sham” in a statement Tuesday.
“The attempt by some senators to adopt the current policy baseline … would result in $37 trillion in additional debt over the next 30 years,” MacGuineas said. “Lawmakers should stop making excuses and fake justifications and rise to the important challenge of making our government fiscally responsible.”
