Republicans have a trifecta, which means they’re trying to pass more expensive tax cuts that will disproportionately go to the rich.
How expensive? They’ll cost $4 trillion over the next decade and would increase upward pressure on the debt ratio by 50 percent. How disproportionate? America’s top 0.1% would get a tax cut of $278,000 while 28 million households in the bottom 80 percent would have no change in their tax bill and 14 million in the bottom 80 percent would actually have their taxes go up.
In looking for ways to extend those cuts, Republicans face two problems.
What’s different is that, this time around, much of what they’re trying to do is currently in effect but set to expire — and Republicans are not pretending the tax cuts will pay for themselves (because they don’t). Instead — and I am not making this up — they’ve just decided to say the costs don’t count. They’re free.
How did we get here? Back in 2017, Trump and congressional Republicans enacted the Trump tax cuts. Because they used a process known as budget reconciliation — the same process they’re using now — most of those cuts are set to expire at the end of 2025.
In looking for ways to extend those cuts, Republicans face two problems.
First, the tax cuts cost $4 trillion over the 10-year budget window, and Republicans can’t even get close to finding a way to pay for them, but some of them don’t feel comfortable with adding that much to the deficit. The House GOP’s proposal attempts to offset some of the extension by kicking millions of people off Medicaid and cutting food benefits down to just $1.67 per person per meal on average. Yet deficits would still increase by around $3 trillion over the decade.
The second problem is that, in order to pass a bill under reconciliation, the bill’s costs beyond the tenth year have to be fully paid for. If Republicans want to make these tax cuts permanent, they must find a way to pay for them in the long term. Given that their conference can’t even really agree on the cuts to pay for one-third of their tax bill, getting the votes for much bigger cuts would be an enormous lift.
So, now Republicans have a new strategy: pretend the tax cuts are free. Magic!
They’re claiming that, because we’ve already been incurring the costs, continuing them shouldn’t count as a new cost. Republicans endorsing this strategy include House Speaker Mike Johnson, Senate Finance Committee Chair Mike Crapo and Treasury Secretary Scott Bessent, who says the Trump White House favors the strategy.
The CBO’s report goes on to say that extending the Trump tax cuts would harm the economy and increase consumers’ borrowing costs.
Unsurprisingly, this is an enormous gimmick. The most fundamental rule of budget scorekeeping is that all costs are always scored at some point. You can score them all up front, or you can score them again and again as you keep extending the program. But what Republicans are asking for, despite getting scored on a temporary basis in 2017 when the tax provisions were first enacted and thus getting to avoid being scored for some of the cost, is to now be scored as free to continue. That means some of the costs would never be scored. No program in the entire budget receives that treatment.
But while Republicans can pretend the costs are free, the Treasury Department will have to finance these expensive tax cuts. That means incurring new debt.
On Friday, the Congressional Budget Office released a report estimating that permanently extending the Trump tax cuts without paying for them would in fact be very costly. The national debt “would reach 214 percent of GDP in 2054, 47 percentage points higher” than if the tax cuts aren’t extended. The CBO’s report goes on to say that extending the Trump tax cuts would harm the economy and increase consumers’ borrowing costs.
For the moment, the scoring method used isn’t entirely in Republicans’ hands. The Senate parliamentarian, the chamber’s expert on procedure and precedents, advises on whether bills meet the rules for reconciliation, and she is unlikely to let Republicans pretend their tax cuts are free.
We’ll likely know the parliamentarian’s answer within the next few weeks. If, as expected, she says no, Republicans have four options: accept her ruling, fire her, ignore her or vote on whether to overrule her — which would require only a simple majority. Depending on their choice, we’ll know whether Republicans will use make-believe to protect the wealthiest Americans, or whether we’ll remain tethered to reality.