Republicans are rushing their tax plan through Congress at lightning speed. White House officials have stated repeatedly they want the GOP tax plan to be a “big, beautiful Christmas present” to Americans taxpayers, but working on that tight of a timeline comes at price. (Many Americans will see a tax increase, especially after the first few years.) The aggressive timeline has left no time for public hearings or even to finish writing the legislation.
What is known about the Republican tax plan is that it is extremely unpopular, even more unpopular than the tax hikes President George H.W. signed into law in 1990 after he promised “no new taxes.”
— (((Harry Enten))) (@ForecasterEnten) November 29, 2017
But there is much about the Senate bill that remains unknown, partly as a result of last-minute scrambling to get the vote on-the-fence Senators.
The mysterious ‘trigger’
Defecit hawks like Sen. Bob Corker (R-TN) and James Lankford (R-OK) both said they wouldn’t vote for the tax plan unless there was some kind of backstop in place that would prevent the deficit from ballooning in case the growth predictions aren’t as rosy as anticipated (they aren’t). This backstop, or trigger, would go into effect when the economy is growing slowly, effectively meaning that Congress would raise taxes on Americans during a recession in order to make up for a huge deficit that was the result of their shoddy math.
As of now, just hours before the Senate will vote on a floor debate, no one except a few Senators behind closed doors even knows what the potential trigger would look like or when it would kick in. It’s also unpopular among a fair amount of Republican senators.
Sen. Thom Tillis (R-NC) opposes a fiscal trigger in tax bill, calling it “well-intentioned” but unnecessary and bad for economic growth.
— Sahil Kapur (@sahilkapur) November 29, 2017
Initial reports out of the GOP Senate lunch suggest a spending cut trigger rather than a tax increase trigger.
Several GOP senators coming out of today's lunch talking about the idea of an auto spending cut trigger instead of a tax increase trigger if growth doesn't hit target
— Phil Mattingly (@Phil_Mattingly) November 29, 2017
In this sense, cuts to crucial programs like Medicare could pay for the mistakes of Republicans.
The missing $80 billion
The Republican leadership won over Sen. Susan Collins (R-ME) by including a $10,000 property tax deduction in the tax bill. There’s a catch, though. Including a property tax deduction would make the Senate bill $100 billion more expensive over the next decade. McConnell only has about $80 billion worth of flexibility. Absent from the legislation is any discussion of how the Republican leadership plans to pay for this. One suggestion has been eliminating the state and local deductions for corporations and using the new revenue to pay for the property tax deduction but that is neither set in stone, nor whether that would be enough.
Senate Republicans have also come to an agreement on the deduction for pass-through businesses to win over Sen. Ron Johnson (R-WI) and Sen. Steve Daines (R-MT), who were concerned the plan does too much for corporations and not enough for small businesses. Changing the deduction to 20 percent from 17.4 percent, however, costs roughly $60 billion dollars.
Non-partisan economic modeling
The Senate is also proceeding to vote on whether to debate the GOP tax plan without dynamic scoring from the non-partisan Joint Committee on Taxation. A dynamic score would factor all expected growth from businesses and families. Preliminary dynamic scoring of the bill from the non-partisan Tax Policy Center found that the bill would still increase the deficit by $1.27 trillion over the next decade after accounting for economic growth. Tax cuts would only generate 0.6 percent GDP growth in 2018, decreasing to 0.2 percent in 2037.
The JCT estimates the cost of any tax bill and already put out a preliminary report that said the Senate plan would add just over $1.4 trillion dollars in debt by 2027. Other initial JCT reports found that if the Senate tax bill made the individual tax cuts permanent (rather than expiring after 2025) it would bring the total cost of the bill to nearly $1.7 trillion dollars, well over the $1.5 trillion allowed to pass with 51 votes through reconciliation. Corporate tax cuts, in both the House and Senate tax plans, are permanent.