Congressional Republicans have implanted nearly 50 expiring provisions in their tax-cut bills that, if left unaddressed, would transform what Republicans promised would be middle-class tax relief into a law that raises taxes for tens of millions of Americans.
More than 80 percent of the tax breaks set to go away would be taken from households. The perks for corporations are generally permanent, including the biggest single benefit in the bill: a permanent reduction of the corporate tax rate from 35 percent to 20 percent.
Democrats have accused the GOP of offering only illusory benefits for families, but White House and Republican leaders in recent days have repeatedly insisted that lawmakers in future sessions of Congress would extend the cuts or make them permanent. Future lawmakers, they argue, would be unwilling to let large-scale tax increases targeting the middle class take effect.
"We have a lot of confidence that Congress will do the right thing," Treasury Secretary Steven Mnuchin told Fox News. "And, again, the priority for the moment is middle-income tax cuts."
But in Congress's current polarized state, no congressional action can be guaranteed, even if both parties agree on its merits. And if Congress were to let the cuts expire, the total bills aimed at individuals would be massive.
The issue, since it came to light a week ago, is causing consternation with Sen. Jeff Flake (R-Ariz.), who thinks the party has designed the bill to get around Senate rules but in a way that could add much more to nation's debt in the future.
Because of these concerns, Flake told Fox News Radio on Wednesday that he is undecided on whether he will support the bill.
He said he is uncomfortable with the design of a five-year tax break on new investments for companies that will expire in 2022. The tax break saves companies between $10 billion and $40 billion a year, the Joint Committee on Taxation has found.
"It will likely be extended," Flake told Fox News Radio. "We do that all the time. . . . And if we do extend that that's a big expenditure that wouldn't do well for our debt or deficit. So I'm looking for ways to be more honest, frankly, about that expensing provision."
In the GOP bill the Senate is considering, many of the tax breaks for families are set to expire in 2025. Over a decade, the phased-in tax increases would add up to nearly $700 billion. And by 2027, half of American households would pay higher taxes under the Senate tax bill than they would if the current tax code were left in place, according to the nonpartisan Tax Policy Center.
In the House bill, a $300 per-person tax credit expires after 2022, a change that would drive up taxes on tens of millions of Americans.
Republicans set the individual cuts to expire to comply with procedural rules limiting how much a tax bill can add to the deficit and still pass in the Senate with 50 votes, rather than the 60 typically needed.
The GOP kept the corporate rates permanent, they say, to encourage companies to make the type of investments that create economic growth.
"If you are a business, you have a 10-year plan because you have to make business decisions and you want to be certain what your costs are," said Rohit Kumar, a former top tax adviser to Senate Majority Leader Mitch McConnell (R-Ky.) and now leader of the tax policy services practice at PwC. "If you are an individual, you aren't going to say, 'I'm not going to take this job, because in five years my taxes are going up.' "
Democrats argue it's a ploy to game Senate rules that would leave future political leaders with vexing decisions about whether to allow sharp tax increases on Americans or continue adding hundreds of billions of dollars each year to the debt.
"It was a gimmick," said Sen. Mark R. Warner (D-Va.), who has opposed the bill. "This is to try to keep within the budget constraints but what they have done in effect is set up a whole new set of 'fiscal cliffs.' "
The perks set to expire are some of those Republicans touted as key to helping families. And their expiration would more acutely affect low- and middle-income families, who face drastic tax increases if political brinkmanship thwarts a compromise to extend them.
In the Senate bill, lower tax rates and the ability to double the standard deduction would expire for individuals and families at the end of 2025, eliminating more than $265 billion in annual tax breaks and driving up taxes on families.
Extending those benefits, however, would create a set of problems for the GOP as it tries to keep its plan in line with Senate rules.
Republicans control only 52 seats in the chamber, and to move their measure with a simple majority, they can't add more to the debt than they'd agreed to in a budget resolution. In this case, that's $1.5 trillion over the next decade.
Another Senate restriction, known as the "Byrd rule," also requires that the tax bills cannot add anything to the debt after 10 years unless 60 senators agree to bypass the rule.
The Penn Wharton Budget Model at the University of Pennsylvania found that the Senate GOP tax bill would add $1.3 trillion to the debt in the first decade, complying with the first Senate rule, and contains enough expiring provisions that it could avoid violating the Byrd rule as well.
"It's politically brilliant, and that's infuriated the left," said Steve Moore, one of President Trump's top economic advisers during the campaign, adding that it was the only way for Republicans to get all the tax cuts they wanted in one package.
"How else are you going to fit a $3 trillion tax cut into a $1.5 trillion box?" he said.
The expiring provisions would set up a series of future fiscal cliffs, Washington shorthand for an abrupt change in tax or spending policy that has the potential to disrupt economic growth.
Past cliffs have created high-tension negotiations over which perks to be extended and which would go away. Lawmakers often wait until the final days before tax benefits expire before deciding whether to extend them, waiting for a moment of maximum political leverage.
The last time Congress had a major showdown over expiring tax breaks came at the end of 2012, when President Barack Obama and Republicans in Congress clashed over what to do with expiring Bush-era tax cuts. Obama wanted to allow taxes to increase for upper-income Americans, and many Republicans tried to oppose him, worried that allowing taxes to rise on wealthy Americans would violate pledges many of them made not to support a tax increase.
They eventually reached an agreement, but not until Jan. 1, 2013, the day the higher taxes were set to go into effect for everyone.
White House officials and Republican leaders have mostly brushed off concerns about the expiring provisions, saying they are confident Congress will step in to ensure that the expiring tax cuts are extended in the future.
"One of the ways to game the system is to make things expire," White House Office of Management and budget director Mick Mulvaney told NBC on Sunday.
He added that "What we tell folks is this: If it's good policy, it will become permanent. If it's bad policy, it will become temporary."
There are examples of lawmakers allowing tax cuts to expire.
Obama successfully pushed for a payroll tax cut in 2011 and 2012 that lowered taxes, but it expired after that. But that package was more narrowly designed. The House and Senate GOP tax plans are broader, and they have described the temporary cuts as placeholders that they expect will be made permanent.
These expiring tax breaks are just some of the many elements of the GOP tax plans that would require future congressional action to stave off severe tax and spending changes that would affect the middle class, low-income people and the elderly.
The House GOP tax bill would, as currently designed, trigger $136 billion in spending cuts in 2018 because the changes widen the deficit, according to the Congressional Budget Office. This is because the tax plan would violate a 2010 law that prohibits new tax cuts from adding to the debt without offsets.
Of those spending cuts, roughly $25 billion would come out of Medicare, the government-run health-care program for older Americans.
Democrats have used this CBO finding to say that the GOP plans would cut taxes for the wealthy in exchange for spending cuts that affect the elderly. Republicans have tried to dismiss these concerns, saying Congress will move to waive the spending-cut rules, as they have in the past. But waiving the automatic spending cuts would require support from Democrats, as 60 votes are needed.
If both parties become further entrenched, or a bill to waive the spending cuts is tacked onto a partisan bill, passage is not assured.
"If there is a deficit, and that happens, and it very well could, well, Congress will have to work its will. That's what Congress is for, and we will," Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) said last week as his panel debated the bill.
Senate Republicans hope to pass their bill next week, and GOP lawmakers have said they plan to introduce an amendment that would make the temporary tax cuts permanent. That would require Democrats to vote along with Republicans to waive Senate rules, something they have not signaled they would do.
Warner, for his part, said he would not support waiving the spending-cut rules.
"They will have to own the results of this," he said.