Senators consider automatic tax hikes if revenue falls short
WASHINGTON — Senate Republicans are considering a trigger that would automatically increase taxes if their sweeping legislation fails to generate as much revenue as they expect. It’s an effort to mollify deficit hawks who worry that tax cuts for businesses and individuals will add to the nation’s already mounting debt.
The effort comes as a second Republican senator, Steve Daines of Montana, announced Monday that he opposes the tax bill in its current form. Previously, Sen. Ron Johnson, R-Wis., said he opposed the bill, leaving Senate Republicans no room for error as they hope to vote on the bill this week.
Both senators complained that the tax bill favors large corporations over small businesses. Republicans have only two votes to spare in the Senate.
At the White House, President Donald Trump maintained that the bill would help all Americans.
“I think it’s going to benefit everybody,” the president said. “It’s going to mostly benefit people looking for jobs more than anything else, because we’re giving great incentives.”
A new congressional estimate says the Senate tax bill would add $1.4 trillion to the budget deficit over the next decade. But GOP leaders dispute the estimate, saying tax cuts will spur economic growth, reducing the hit on the deficit.
Many economists disagree with such optimistic projections. The trigger would be a way for senators to test their economic assumptions, with real consequences if they are wrong.
“Do we have realistic numbers and is there a backstop in the process just in case we don’t?” asked Sen. James Lankford, R-Okla.
“We should build in the ‘What if ?’ What if this doesn’t work?” Lankford said. “What changes might be needed in the tax code in the days ahead to be able to adjust in what scenario?”
Sen. Bob Corker, RTenn., said the Trump administration and Senate Republican leaders are open to some kind of a trigger to increase revenues if the tax plan falls short.
Neither Corker nor Lankford spelled out exactly how the trigger would work, noting that senators are still working on the proposal.
Trump and Senate Republicans scrambled Monday to make changes to the bill in an effort to win over holdout GOP senators.
“Very possible,” Corker said when asked if he might vote “no” in the Senate Budget Committee on Tuesday if the revenue issue isn’t settled. “It’s important for me to know we’ve got this resolved,” he said.
The tax bill would sharply reduce the corporate tax rate and reconfigure the system by which multinational companies pay taxes to the U.S. government. It would also reduce tax rates for individuals while eliminating some deductions, including those for state and local taxes, and allow noncorporate businesses an additional deduction.
The corporate changes would be permanent, but those for individuals and so-called pass-through businesses would be set to expire at the end of 2025, in order to comply with Senate budget rules. The House bill, however, makes the individual cuts permanent, and that is one of many differences with the Senate legislation that will ultimately need to be resolved.