Republicans Want to Make Deficit-Busting Tax Cuts Permanent

(CQ Roll Call via AP Images)

Treasury Secretary Steven Mnuchin, left, with Finance Committee Chairman Orrin Hatch, R-Utah, right, and Sen. Pat Toomey, R-Pa., during Mnuchin's confirmation hearing in January. 

Tax cuts for the rich and corporations simply aren’t enough, says a growing chorus of influential Republicans in both Congress and President Trump’s cabinet. For the trickle-down economic growth to be fully realized, they say, their generous cuts need to be permanent(-ish).

Under current Senate rules, deficit-increasing tax cuts must expire after ten years. The Republicans claim that this makes corporations and the wealthy too economically anxious to invest and create jobs.

Once they get done shredding the American health-care system, Republican leaders hope to be ready to pass a big tax-cut plan with a simple majority in the Senate (avoiding a Democratic filibuster) by using the budget reconciliation process. However, the Senate’s “Byrd Rule” requires that a reconciliation bill may not increase the deficit for longer than the current ten-year budget window.

But an increasing number of Republicans seem to have already given up on the prospects of comprehensive tax reform, which would have to balance out steep rate cuts for corporations and those in the top brackets with loophole closures and regressive revenue-raisers like Paul Ryan’s border adjustment tax.

Republican leaders like Paul Ryan and Mitch McConnell are still holding out hope for a deficit or revenue-neutral tax reform—at least publicly.

However, perhaps worried that GOP leadership will fail to pull off this political trapeze act, more and more Republicans are now pushing for a backdoor budgetary cheat code: dramatically extending the budget window so Congress can secure deficit-exploding tax cuts for decades without doing the difficult political work of financing them.

Led by Pennsylvania’s Republican Senator Pat Toomey, an influential cohort of conservatives including Senate tax writer Orrin Hatch, Trump’s budget director (a longtime deficit hawk) Mick Mulvaney, Treasury Secretary Steve Mnuchin, and anti-tax fanatic Grover Norquist are calling to extend the window to as many as 30 years.

In an op-ed for Bloomberg, Toomey noted that “nothing in the law prevents us from using a 20- or even 30-year time frame. A 20- or 30-year tax reform would be as close to permanent as we can get since Congress would be likely to overhaul the tax code within that period anyway.”

“Congress must seize this rare opportunity. We can’t let a fixation on deficit predictions or arcane budget rules get in the way. We were elected to get this done,” Toomey wrote.

Even Mark Meadows, leader of the Freedom Caucus, which is composed largely of budget hawks who generally balk at any policy that would increase the deficit, has signed on. "Providing for tax cuts over a 20-year period is about as permanent as you can find on Capitol Hill," he told Axios in late June.

Traditionally, the purpose of the budget window is to keep Congress from engaging in budgetary shenanigans like just kicking the cost of deficit-increasing policies down the road by a few years. In the 1980s, a five-year budget window was typical and it’s gradually been extended to the current ten-year window.

Proponents are trying to sell fiscal conservatives—and the public—that passing long-term tax cuts without paying for them is not fiscally irresponsible because businesses would able to invest much more confidently knowing that their tax burden would lower for the foreseeable future.

Experts say that’s not how it likely would play out.

“I don’t think [it would have] a huge effect because the tax law doesn’t stay the same for ten years anyway,” says Len Burman, a former Treasury official and co-founder of the Tax Policy Center.

“It’s a little bit ironic that they’re talking about extending the budget window to facilitate budget shenanigans,” he adds. “Maybe it’s not surprising that politicians look for easy ways to do things that are politically popular [like tax cuts].”

First, Republicans like Mnuchin said that the tax cuts would pay for themselves with economic growth. Now, implicitly admitting that won’t happen, they want to just change the rules to pass deficit-ballooning tax cuts.

Lengthening the budget window to secure near-permanent net tax cuts would address the problem that plagued Republicans’ last foray in federal supply-side policy (apart from the fact that it didn’t work). President George W. Bush’s 2001 tax cuts were sunshined out ten years later during the Obama administration.

This new tactic nakedly betrays the GOP’s insistence on trickle-down tax cuts above all else. If you can’t pay for permanent tax cuts for the rich, just change the rules.

Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives’ age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren’t made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.

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