Senate Budget Committee member Ron Johnson said the panel is considering a budget that would allow for $1.5 trillion in tax cuts that would add to the deficit on a so-called “static” basis over the next 10 years.
If the panel follows that course, at least some of the cuts in any tax-overhaul bill that follows the budget may have to be only temporary. That’s because Senate leaders want to use a budget procedure that would protect the tax legislation from a Democratic filibuster—and that procedure requires that the legislation can’t add to the long-term deficit.
The notion would also represent a pronounced departure from Senate Majority Leader Mitch McConnell’s position earlier this year. McConnell said during a Bloomberg interview in May that a tax overhaul can’t add to the nation’s “alarming” debt.
Johnson, a Wisconsin Republican, said $1.5 trillion is the minimum amount he’d like to see, and he’d weigh doing as much as $3 trillion. That would make it easier for the GOP to create a tax bill with cuts that aren’t completely offset by revenue raisers or the elimination of deductions. Johnson said the panel’s numbers don’t take into account the economic growth that would result from tax changes—and he believes the cuts would stimulate enough growth to pay for themselves.
Johnson and others advocate the use of “dynamic scoring” —a method that considers the effects of any changes on the larger economy—as opposed to “static scoring,” which examines only the changes themselves. Economists disagree on the best way to shape dynamic scoring models.
Senator Bob Corker, another member of the budget panel, has been skeptical of assuming such large economic growth effects. Corker, a Tennessee Republican, said he’s mulling the numbers ahead of a meeting today where a decision may be made. Corker met with President Donald Trump in the Oval Office Friday, where domestic policy was discussed.
Johnson said discussions are ongoing and the committee may wait to decide on a budget until it sees more specifics of a tax plan from the tax-writing committees and the White House. “There’s a spectrum of opinion inside our conference,” Johnson told reporters Tuesday. “Why do tax reform if you are not getting a lot of economic growth?”
A Senate Republican aide said that the budget is expected “sooner rather than later,” and discussions are ongoing among the committee and the wider conference.
Johnson said that part of the $1.5 trillion in static revenue cuts, as compared to the Congressional Budget Office baseline, would be due to the committee assuming that $450 billion in expiring tax breaks are extended. CBO’s baseline assumes the tax breaks actually do expire, even though Congress regularly extends them. Johnson said assuming the tax breaks are extended better represents “reality.”
First Step
Republicans have to agree on a 2018 budget resolution—a necessary step to unlock the procedural maneuver they intend to use to pass the tax plan with 50 votes in the Senate. The party controls only 52 of the chamber’s 100 votes. White House advisers and congressional leaders have promised a tax framework outlining more details the week of Sept. 25, which may help to assuage members of the conservative House Freedom Caucus, who have said they won’t vote to pass a budget out of the House until they get more details on tax changes.
Senator Mike Crapo of Idaho, a member of the tax-writing Finance Committee, said Monday he wants a tax cut that’s “as big as we can get” within the budget window, though he declined to put a number on it. He said it “depends on what kind of dynamic impact a tax relief package can have, but I want it to be as big and bold as we can get.”
Another committee member, Senator Bernie Sanders, a Vermont independent who caucuses with the Democrats, said senators should discuss who’d get the benefits of a tax cut before discussing its size.
“My strong guess is that Republicans want to give a tax cut to billionaires which is exactly what we don’t need,” Sanders said in an interview.
—With assistance from Sahil Kapur
