Republicans working on tax hike ‘trigger’ to ease deficit concerns
Republicans may build something unusual into their tax bill — a “trigger.”
It’s meant to address concerns by some members of the GOP that the bill, by cutting taxes for corporations and individuals, could add more to the national debt than its supporters expect.
Tax cuts reduce government revenue. But Republicans promise that their tax bill will promote enough economic growth to make up for it.
If that doesn’t happen, the trigger could automatically raise taxes.
How exactly the trigger would work is still unclear.
Would it mean automatic across-the-board tax hikes for individuals? For businesses? For both? By how much? And what yardstick will be used to assess “not enough growth”? Economic growth varies from quarter to quarter and a lot of factors go into it besides taxes.
Beyond that, legislators have to structure the trigger in such a way that it doesn’t violate the Senate’s mind-bending budget rules, CNN’s Phil Mattingly notes.
While legislators try to hammer out details, criticism of the idea has been swift.
“I’d rather drink weed killer than vote for the thing,” Republican Senator John Kennedy of Louisiana told reporters.
“A fiscal trigger Is impractical, unreasonable, and unnecessary,” according to the U.S. Chamber of Commerce.
Some market strategists, meanwhile, note it might undermine the economic support the cuts are intended to provide.
“It’s one of the dumbest ideas. … It would raise taxes at the absolute worst time — during an economic slowdown,” said Peter Boockvar, chief market analyst at The Lindsey Group.
And those concerned with fiscal policy smell something fishy.
“This takes budget gimmicks to an entirely new level,” said Chris Krueger, senior policy analyst at Cowen Washington Research Group, wrote in a note on Wednesday. “What is Congress trying to do next week? Bust [spending] caps … for a third time. … There is just no way that this will ever go into effect, which means it is at best a facade and excuse to vote ‘yes’ but keep some semblance of fiscal responsibility.”
Independent deficit hawk Maya MacGuineas, president of the Committee for a Responsible Federal Budget, is open to the idea of a trigger but not if it’s crafted with easy ways to skirt it.
“Given that lawmakers are making assumptions about how much growth will result, a well-designed trigger to make up any difference if growth falls short is a very sensible backstop they should include,” MacGuineas said. But she added, “if it doesn’t make up enough revenue or lawmakers don’t intend to abide by it, it just becomes an excuse to support a fiscally irresponsible tax cut. We still need to see the details to know which one this is.”
There’s no consensus among experts about the tax bill’s fiscal impact. To say the least. The most recent estimate from the nonpartisan Congressional Budget Office estimates it would add at least $1.4 trillion to the debt in the first decade.
The Committee for a Responsible Federal Budget estimates there are enough budget gimmicks in the bill — including one to let individual tax breaks expire after 2025, which no one thinks lawmakers will let happen — that the total cost could rise to $2.2 trillion.
And while there is still no official estimate of the bill’s economic growth potential, outside experts expect it to be modest.
— CNN’s Lauren Fox contributed to this report.