Reckless tax policy
This editorial appeared in the Washington Post. “A foolish consistency is the hobgoblin of little minds,” Ralph Waldo Emerson famously wrote. And, as if to prove his point, the Republican-majority House Ways and Means Committee has just voted to make permanent major individual income and estate tax cuts that were enacted in 2017, but scheduled to expire in 2025. This certainly will eliminate an apparent inconsistency in the tax law — it cut taxes permanently for businesses, but only temporarily for households.
The price tag, however, will be $631 billion in additional federal debt over the next decade, according to the Tax Policy Center, a joint project of the Brookings Institution and the Urban Institute. That’s a bit misleading, however, since all the impact would occur in the years 2026 through 2028. In the decade after 2028, the measure would add another $3.2 trillion to the debt, the Center estimates.
The 2017 tax law was indeed a mass of contradictions, of which the contrast between permanent cuts for corporations and temporary cuts for individuals was only one. That inconsistency, in turn, was the necessary consequence of a more fundamental violation of principle: namely, the Republicans’ unwillingness to offset the tax cuts with spending reductions, in blatant contradiction of their professed aversion to increasing the national debt. Making the individual cuts temporary was a gimmick to make the unpaid-for package compatible — on paper — with congressional budget rules. Otherwise, it could not have passed with a simple majority in the Senate.
All along, this was understood to be a phony exercise, with the tax cuts eventually made permanent by a later Congress. The Ways and Means Committee’s vote is the first step in that process. There is little or no chance the Senate will even take the matter up this year, much less that it could muster the 60 votes that would, in this case, be necessary for passage. That is of secondary importance to House Republicans, who are staging a political show for the party’s base in advance of November’s midterm elections.
Symbolic or not, the law puts the Republicans on record in favor of a measure that would be fiscally irresponsible. What Congress actually needs to do is to put in place new tax measures that actually help decrease the national debt, or at least prevent it from increasing. That is the only policy consistent with the national interest.