Tax bill sunset will require legislating, not continuing
Words are powerful. That has been said by so many people that there is no lone source to which it is attributed. Letters can also be powerful.
I have a hat that says “OU.” Another has two intersecting “T”s. Another says “BU.” Each was purchased for me by one of my daughters.
If I wear the “OU,” people say “Boomer” as I walk by. The two “T”s induces “guns up” with two raised and tilted fingers. The “BU” brings “sic ‘em.”
Wear a cap with “CR” in Denver and people assume you are a Colorado Rockies fan.
Like the other examples, just two letters convey a powerful message.
In Washington D.C., the letters “CR” means something different. And yes, it must be something powerful.
So powerful that it can replace a normal budget that includes agreements on what to spend and how to fund that spending.
“CR” means continuing resolution. Our nation has a budget. In the last 47 years, the nation adopted a budget at the start of a fiscal year just three times. The last time was 1997.
When the nation fails to adopt a budget, its activities can shut down. To prevent this, Congress says, “Let’s just keep doing what we were doing.”
Budget? We don’t need no stinking budget. We’ll just resolve to continue. Yes, that’s right. And we’ll call it a continuing resolution.
In December 2017, our nation passed a tax bill. When we reach December of 2025, we will not be able to simply resolve to continue this tax bill.
We will have to do more than that. The two houses of Congress and the president will need to legislate. A CR will not do the trick.
We’ve had a little trouble legislating lately. If that continues, the citizens will face a $3.4 trillion tax increase for the 10-year period beginning in 2026.
Tax policy analysts are all over this. Legislators are not. It’s coming in 21 months. Failure to plan will be planning to fail.
A do-nothing Congress can reduce future budget deficits by $3.9 trillion through 2035. That’s the tax increase with savings in interest charges.
Tax rate increases will raise an added $1.8 trillion. Dropping the special 20% deduction for business income will add $548 billion.
Reducing the exemption allowed for estate tax transfers will raise $126.5 billion. Reducing the “standard” deduction will cost our citizens $1 trillion.
These numbers are all on the revenue side of the federal budget process. The figures given assume all else is held constant. For example, expenses follow a CR.
If the tax policy wonks are all over this, what are they saying? Something is likely to happen by 2026. Something may not happen by 2026.
When we watch Congress adopt CRs over and over, it’s quite a challenge to believe that that same legislative body will act decisively on the 2025 expiration of the tax cuts.
The 2017 law was a Republican-only law. However, Democrats do support some of its provisions.
The most hopeful scenario seems to be that with a divided government, many of the 2017 provisions will be kicked down the road through a give-andtake process.
For this to happen, it is expected that everything is on the table, including 2017 provisions that do not expire. For example, the 21% corporate tax rate.
One side likes the higher estate tax exemption. The other likes higher corporate tax rates. Give and take exists for other provisions as well.
Although we have only adopted three timely budgets in 47 years, and none in 27 years, there is a history of bipartisan negotiation on expiring tax provisions.
No legislator seems to want to deal with out-of-control spending. This explains the continuous use of the CR.
Legislators seem more willing to deal with out-of-control tax cuts. Cutting revenues and raising expenditures both seem to be popular.
Of course, this is not a logical approach to budgeting. But the CR seems to make voters happy.
Voters say they are angry. They may also support spending cuts in principle. But when it comes to specific cuts, it seems that just continuing as is works for incumbents.
It may be that continuing tax cuts will work also.