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House GOP pushing a new round of tax cuts that could cost $2 trillion over 10 years

| Tuesday, Sept. 11, 2018, 10:15 p.m.
House Ways and Means Committee Chair Rep. Kevin Brady, R-Texas, speaks during a committee hearing on Capitol Hill in Washington. House Republican leaders have unveiled their proposal to expand the massive tax law they hustled through Congress last year. They’re aiming to make permanent the individual tax cuts and small-business income deductions now set to expire in 2026. Brady is looking toward a vote on the legislation by the House this month.
House Ways and Means Committee Chair Rep. Kevin Brady, R-Texas, speaks during a committee hearing on Capitol Hill in Washington. House Republican leaders have unveiled their proposal to expand the massive tax law they hustled through Congress last year. They’re aiming to make permanent the individual tax cuts and small-business income deductions now set to expire in 2026. Brady is looking toward a vote on the legislation by the House this month.

House Republicans bracing for November’s midterm elections introduced a second round of tax cuts on Monday that could add more than $2 trillion to the federal deficit over a decade. They hope to cement the steep cuts they passed last fall despite criticisms of fiscal profligacy and tailoring their policies to help the rich.

The GOP’s “tax reform 2.0” aims to make permanent the tax cuts for individuals that President Trump signed into law in December 2017. Those include the law’s temporary reductions in individual filers’ rates, a doubling of the Child Tax Credit and cuts to the estate tax paid by a small fraction of the wealthiest families.

Critics have said the proposed changes would primarily benefit the wealthiest taxpayers. Republicans, meanwhile, have argued their tax cuts help fuel the American economy by putting more money in consumers’ hands.

The proposals are not expected to pass Congress this year, as they require 60 votes in the Senate. Congressional Democrats quickly panned the plan, released by Rep. Kevin Brady, R-Texas, who is chairman of the House Ways and Means Committee and a key architect of last fall’s tax cuts.

The tax cuts for individuals under the original Republican tax law are mostly set to expire by 2025. Republican lawmakers decided only to make the law’s tax changes for corporations permanent — including lowering the corporate tax rate from 35 percent to 21 percent — to prevent the law from costing more than $1.5 trillion in a 10-year window.

Republicans gave Congress almost a full decade to extend these individual tax cuts before they expire. But the law’s mediocre polling numbers — and the difficult election outlook for House Republicans — have increased their sense of urgency. With Democratic candidates characterizing the law as a giveaway to large corporations, Republicans are trying to counter by drawing attention to its rate reductions for individual taxpayers.

“Last year, we said goodbye to America’s old, broken tax code,” Brady said in a news release. “Now, it’s the time to ensure we never let our tax code become so outdated again. “

But the price tag for extending them will be high. Brady’s plan would add about $630 billion to the federal deficit by 2029, on top of the $1.9 trillion the law is already expected to cost when factoring in higher interest payments, Congress’ Joint Committee on Taxation said on Tuesday.

Beyond those three years, the costs would continue to pile up. Starting in 2026, the cuts could cost the federal government about $165 billion annually in today’s dollars, according to projections by the Tax Foundation, a conservative-leaning think tank. That annual cut would add up to a roughly $2.4 trillion addition to the federal deficit over a 10-year period, the Tax Foundation found.

The Center for Budget and Policy Priorities, a center-left think tank, estimated that the plan would cost $2.9 trillion in the 10 years after it takes effect, or from 2026 to 2035. From 2029 to 2038, the think tank said, that cost could reach as high as $3.4 trillion. (The projections of both think tanks were made before Brady released the text of his legislation on Monday. Congress’ official scorekeeper is expected to release more detailed numbers soon.)

The plan was crafted with input from White House officials and the Treasury Department, according to a House Republican aide. It is expected to be considered by the committee on Thursday and may come to a vote on the House floor this month.

But Brady’s bills are almost certainly dead on arrival in the Senate, where Democrats have the votes they need to thwart the effort. Democratic senators from red states voted uniformly against the GOP tax law passed in December, and Senate Majority Leader Mitch McConnell, R-Ky., is not expected to put the new package to a vote.

Democrats said the GOP’s second round of tax cuts would punish the poor and the middle class, arguing that they will provide a pretext for later spending cuts to entitlement programs that help the elderly. The richest 1 percent of Americans would see an average $24,130 cut from extending the individual tax cuts, compared with an average cut of $460 for those in the bottom 60 percent of the income distribution, according to the Institute on Taxation and Economic Policy, a left-leaning think tank.

“Republicans’ first tax law raised taxes on middle-class families, hiked health care costs for millions and showered the most well-off and well-connected with massive tax cuts,” said Rep. Richard E. Neal, D-Mass., the top Democrat on the House Ways and Means Committee. “This tax legislation won’t help workers or families, but it will further enrich GOP donors and provide Republicans with more ammunition to attack programs like Medicare and Social Security. “

The GOP’s second round of tax cuts would also make permanent the new 20 percent deduction for “pass-through” entities - companies in which business income is “passed through” to an individual’s tax returns - as well as reductions to the alternative minimum tax, paid mostly by those earning more than six figures.

The new package would also make permanent a number of provisions passed last fall to raise revenue and offset the cost of the cuts, including the elimination of several itemized deductions and a new $10,000 cap on the amount taxpayers can deduct from their state and local taxes. That policy in particular has garnered criticism from House Republicans in states such as California and New Jersey, whose residents are disproportionately hit by the cap, and could complicate the bill’s passage through the lower chamber.

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