Independent analysis says budget bill could add $200B to deficits
WASHINGTON — House Democrats’ budget reconciliation bill could increase federal deficits by roughly $200 billion over 10 years, falling short of lawmakers’ ambitions to fully pay for the climate and social spending package, a nonpartisan budget watchdog group said Monday.
The Committee for a Responsible Federal Budget said in an analysis that House Democrats’ latest version of the bill includes $2.4 trillion in spending and tax expenditures but only $2.2 trillion in offsets.
The group counts Democrats’ proposal to raise the current $10,000 cap on state and local tax deductions to $80,000 through 2030, with a brief snapback to $10,000 in 2031, as both an expenditure and an offset. The provision would cost $285 billion through 2025, when the current $10,000 cap is set to expire, and raise $300 billion after that, resulting in a net $15 billion in revenue, according to CRFB’S numbers.
That’s consistent with Democrats’ estimates that the SALT provision would raise $14 billion over 10 years, in a deliberate attempt to make the increased cap pay for itself over time.
The CRFB said that the revenue increase from the SALT changes come when measured against current law and that’s what they included in their tally. But they note the cap increase “would substantially increase the cost of extending” other individual provisions in the 2017 GOP tax law that are set to expire after 2025 “and thus is likely to result in lower revenue collections over time.”
When SALT is not factored into CRFB’S numbers, the toplines of $2.1 trillion in spending and tax expenditures and $1.9 trillion in revenue offsets are closer to a Nov. 4 preliminary estimate from the White House. The administration’s estimate tallied the gross cost of the package around $2 trillion and said it would be more than fully paid for with tax increases, enhanced tax enforcement and health savings.
Tax enforcement difference
However, the offsets still fall $200 billion short in CRFB’S numbers because the White House is expecting much larger gains from the $80 billion in mandatory funding the bill would provide to the IRS to improve tax enforcement.
The White House has estimated the increased IRS funding would net $400 billion in revenue, but CRFB says it’s likely to be less than one-third of that total.
“Based on recent CBO estimates, we believe the legislation will generate roughly $125 billion on net from improving tax compliance,” the group said in its analysis.
House Ways and Means Chairman Richard E. Neal said last week the White House estimate of $480 billion in gross revenue, which nets $400 billion after the $80 billion in increased spending for the IRS is factored in, is “realistic.”
The Massachusetts Democrat said he expects IRS Commissioner Charles P. Rettig, who has floated even higher revenue estimates from enhanced tax enforcement, to explain to the CBO what his agency can do with the mandatory funding that will produce higher revenues.
“I think he’s going to weigh in and I think that will be very helpful,” Neal said.