The conservative Committee for a Responsible Budget finds:
While the Tax Cuts and Jobs Act (TCJA) under consideration in the House would satisfy reconciliation instructions requiring it add no more than $1.5 trillion to the deficit (which is far too much), as written it would violate the “Byrd rule” and thus would require 60 votes to pass in the Senate.
Most significantly, we estimate the legislation would add about $155 billion to the deficit in 2028; the Byrd rule does not allow reconciliation legislation to add to the deficit at all beyond the budget window (which currently ends in 2027).
CFRB notes the difficulty in coming up with a fix. “One option would involve letting the corporate tax rate cut expire in 2027 while retaining the corporate base broadening. We estimate the corporate rate cut costs about $175 billion in 2028, suggesting its expiration would cover the TCJA’s 2028 deficit (actual revenue from expiration will differ some).” The problem is that ” a temporary corporate tax cut would undermine the [incentive] for businesses to invest and may even be more anti-growth than no corporate tax cut at all.”
Republicans could try to sunset other provisions, but they are already fighting a rear-guard action by business and right-wing voices criticizing the bill as not pro-growth enough. Republicans, of course, could do the responsible thing, namely make the bill more fiscally sober. Ideas include “adding an across-the-board tax expenditure cap for higher earners, identifying more tax breaks to repeal or reform, trade temporary expensing and the modest interest deduction limit with a more aggressive and permanent expensing-for-interest swap that raises revenue over the long term, cutting spending, scaling back some of the bill’s rate reductions, or including a combination of these approaches.”
CFRB is not the only group that spots a Byrd Rule problem. CNBC reports on a new study based on the University of Pennsylvania’s Penn-Wharton economic model:
The Penn-Wharton model shows that the House GOP tax bill would reduce tax revenue by $1.7 trillion over the next 10 years. That exceeds the $1.5 trillion permitted under the budget “reconciliation” rules that allow Senate Republicans to sidestep Democratic filibusters.
Moreover, the model projects that the House bill would lose another $2.6 trillion in revenue during the 12 years after 2027. Under the no-filibuster rules, the tax bill would not be permitted to increase the deficit at all after its first 10 years.
It seems that House leadership never intended to craft the bill so as to comply with the Byrd rule. If that’s the case, they will once again be asking members to support an increasingly unpopular bill that cannot get through the Senate. “Oh, we’ll fix in conference,” they say but that still leaves House members taking a vote that will be criticized for excessive benefits to the rich, little or no benefit over the long run for the middle class and a huge corporate tax cut. It is that vote that House members, including vulnerable ones in swing districts, will need to defend.
The tax bill drafters are being torn every which way. It’s too generous to the rich, say Democrats and many outside groups. It has to include repeal of the individual mandate, complain some Republicans. It’s not pro-growth enough says business. Busting the budget with added debt is a no-go for fiscal hawks in the Senate. Can all this get straightened out by year’s end? I would not count on it, especially if we are facing, as some lawmakers worry, a possible shutdown fight in December.
In short, once again drafting in secret with no hearings proves to be a mini-disaster. You’d think Republicans would have caught on by now.