House GOP explores alternative math on Trump tax cuts
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House Republicans are actively exploring how they can score the deficit cost of extending Trump's 2017 tax cuts by using multiple sets of accounting standards.
Why it matters: Depending on the standard, the cost of extending Trump's signature Tax Cut and Jobs Act for 10 years could be $4.6 trillion ... or $0.
- That will give Republicans a great deal of flexibility — and a set of alternative numbers — to tell their constituents how much all of the proposed tax cuts are going to add to the deficit over 10 years.
Driving the news: House Republicans spent the last three days at their retreat in Miami struggling to agree on top-line spending cuts.
- "There could be different assumptions that we can look at, all of which have to be defensible, credible, doable," House Budget Committee Chairman Jodey Arrington (R-Texas) told Axios.
- "I think that's a healthy thing, especially when assumptions from the government scorekeepers have been so off in the past in this regard."
- Republicans have yet to make a final decision on the kind of accounting tactics they are going to use, but they are in active discussion with the House parliamentarian about using several different measures.
Zoom out: Republicans — and Democrats when they are in power — have long criticized how the Congressional Budget Office and the Joint Committee on Taxation score the costs of a given tax cut.
- The most traditional debate centered on dynamic versus static scoring.
- Dynamic scoring factors in the economic growth that tax cuts can create. When used, it makes most tax cuts appear less expensive.
- Static scoring doesn't assume any GDP growth and makes tax cuts appear more expensive.
Zoom in: This year, Republicans are adding another wrinkle to the scoring debate as they contemplate directing CBO to use a different starting point for the budget baseline.
- Senate Finance Committee Chair Mike Crapo (R-Idaho) wants to assume that extending tax cuts that are currently in place — like the Tax Cut and Jobs Act — won't cost anything to extend.
- It's "current policy," the Republicans say. Therefore, it should not be considered a change. Cost = $0.
But the Congressional Budget Act of 1974 requires that Congress use "current law" to account for how much a tax cut will cost.
- Since current law assumes Trump's tax cuts will expire this year, CBO has to assume that extending them will add $4.6 trillion to the deficit.
The bottom line: There's one number that's harder to fudge: the deficit to GDP ratio. Treasury Secretary Scott Bessent wants to bring that down to 3%.
- Under President Biden's last budget, officials said the ratio would be 6.1% in fiscal year 2025.
