The congressional majority is seeking to extend expiring portions of the 2017 Tax Cuts and Jobs Act (TCJA). Relative to sunsetting these tax cuts as provided under current law, the cost of their extension would be $4 trillion over the coming decade—or around $400 billion per year. But, instead of reflecting this reality, the majority is attempting to force the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) to say the fiscal impact is instead zero dollars by using a “current policy” baseline rather than the “current law” baseline that is defined in statute. This approach is unprecedented in the 50 years since the CBO was formed and Congress acted within the current budget framework.
The majority argues that, because the government is currently issuing debt to finance the Trump tax cuts, we should book it as free to keep doing that in the future. That argument doesn’t pass the smell test and deviates from other scoring practices.
In 2015, Congress made many tax extenders permanent—policies that had been extended on a temporary basis many, many times in the past. But rather than pretend those policies were free, the official score showed their true fiscal impact: nearly $500 billion. And when Congress attempted to enact the Build Back Better agenda during President Joe Biden’s administration, the CBO score did not treat continuing the enhanced child tax credit as free.
Most directly, when President Barack Obama’s administration and Congress secured a bipartisan deal to extend most of the Bush tax cuts, they, too, were not assumed to be free. While both the Obama administration and Congress framed the extension as free (and, in fact, as reducing the deficit because it allowed a portion of the tax cuts to expire on schedule), the official budget score showed the nearly $4 trillion in cost.
Congress should be able to increase deficits if it wants to. But it should do so with honest, transparent, and consistent accounting. What the current congressional majority is seeking isn’t that. Instead, it is a gimmick intended to solve two problems—one political and one procedural.
First, elected officials of both parties can be wary of legislation with significant costs. Pretending that $4 trillion in fiscal impact is instead $0 helps with that. Second, because the majority is using budget reconciliation, its bill is not allowed to increase deficits beyond the ten-year budget window. But this gimmick would allow them to pretend there simply are no costs, avoiding that hurdle.
But, no matter what baseline Congress uses, the extra debt impact of extending the Trump tax cuts will be the same. According to a recent report from the CBO, if the expiring provisions from the TCJA were extended, the U.S. debt-to-GDP ratio would increase by nearly 50 percentage points, breaching 200 percent of GDP within 30 years. Extending them would lower Americans’ wages and would raise Americans’ borrowing costs, such as mortgages and car loans.
What’s more, the U.S. fiscal outlook could turn even worse if the majority goes beyond extending the TCJA to eliminate taxes on tips and overtime or to enact tax cuts beyond that—or if the economic impact of the Department of Government Efficiency (DOGE) results in lower-than-projected tax revenues.
There is a crucial issue of fiscal discipline here. Changing the rules opens a new world in which Congress can legislate temporary tax cuts or temporary entitlement programs and then extend them at no cost. For instance, in the first year of the Biden administration, Congress expanded the Affordable Care Act’s premium tax credits and the child tax credit; approved another round of stimulus checks; and extended the enhanced unemployment insurance. Using this current policy gimmick would have allowed Congress to make all those policies permanent at no scored cost.
Whether one believes the United States should be cutting taxes or increasing spending, there should be no question that forcing the CBO and JCT to pretend that policies have no fiscal impact would allow Congress to make major tax and spending decisions with no arithmetic recognition of the cost. This would be the epitome of fiscal irresponsibility. Congress needs to responsibly bring down deficits. Establishing principles that make it possible to incur huge costs without recognizing them would be an egregious and dangerous error.
About the authors: Lawrence H. Summers is a distinguished senior fellow at the Center for American Progress. Bobby Kogan is the senior director of federal budget policy at American Progress, working to ensure the federal budget prioritizes policies that help the most vulnerable people. Emily R. Gee is the senior vice president for inclusive growth at American Progress.
This article was published by the Center for American Progress.
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