The Senate Budget Committee has announced a budget resolution deal that will pave the way for President Trump’s promised tax reform.
Senator Pat Toomey (R-PA), a member of the committee, says they have reached a deal that will “give the Finance Committee the headroom needed to write a pro-growth tax plan that reforms the code, causes the economy to surge, and ultimately results in reduced federal budget deficits.”
Details are still forthcoming, but the document does promise a tax reduction “over a 10-year period.” Absent from the document was just how much of a tax cut would be allowed, a number that has been a key point of contention among senators.
Senator Bob Corker (R-TN), another member of the committee, had previously argued for complete deficit neutrality. Toomey was gunning for a $2 trillion tax cut over the next 10 years. The deal was allegedly set at $1.5 trillion in tax cuts.
“I think there is” a deal, said Corker, not denying the $1.5 trillion figure. Corker says he would be hard-pressed to vote for a bill that would increase the deficit, which is expected to hit $700 billion this year. But he’s willing to be flexible. “I’m all for pro-growth tax reform but over a decade it needs to pay for itself per valid models.”
Senator John Thune of South Dakota says Toomey and Corker “represent the far ends of the spectrum when it comes to what they want to see that look like…The fact that they are coming together leads me to believe we are getting close to a budget that will come out of committee and we can bring to the floor.”
Much of the debate over any future tax legislation will depend on models used to generate estimates of economic impact and cost to the government. Central to this issue is something called “dynamic scoring,” a form of evaluation that takes into account Republicans’ longtime claim that tax cuts stimulate the economy, generate jobs, widen the tax base, and thus pay for themselves.
Analyses will be conducted by impartial groups that have used dynamic scoring in the past.
The $1.5 trillion figure is at odds with Republicans’ former promises to design a tax plan that would not add to the deficit. Unlike in the House, GOP Senators are not planning to pair the tax plan with spending cuts.
This is a surprise concession from Corker, a longtime deficit hawk. “We hope this is highly pro-growth,” he says of the resolution. “We hope, by the way, that Congress will be firm in closing loopholes. Honestly, that worries me the most about all of this.”
On Monday, Corker opposed a popular defense measure that would have wrecked the budget, arguing that “the inability to get our fiscal house in order is the greatest threat to our country.”
Depending on what happens with the Graham-Cassidy healthcare bill, the committee could take up the resolution as early as next week. If approved, it would enable tax writers to cut corporate and individual tax rates in hopes of boosting GDP to Trump’s promised 3%.
The work of the budget panel is paramount because Republicans will need to agree on a plan in order to pass future tax legislation without a Democratic filibuster. But House and Senate Republicans are still divided, and the budget argument is months behind schedule.
It’s also important to note that Senate rules for fast-track debate on taxes and budget require that some of the provisions in the upcoming measure be temporary.