Rift opens in GOP over budget strategy

Rift opens in GOP over budget strategy
© Greg Nash

GOP lawmakers and outside groups are divided over whether Congress should lengthen the budget window to facilitate tax cuts.

Supporters of making the budget window longer than 10 years argue it would allow Congress to pass temporary tax cuts that could last for a longer period of time. Opponents think that tax reform should be permanent and therefore revenue neutral.

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The idea of a longer window has gained support since Sen. Pat Toomey (R-Pa.) first floated the idea in early May, but the idea has yet to gain traction with GOP decisionmakers.

Senate Finance Committee Chairman Orrin HatchOrrin Grant HatchKoch groups: Don't renew expired tax breaks in government funding bill Hatch tweets link to 'invisible' glasses after getting spotted removing pair that wasn't there DHS giving ‘active defense’ cyber tools to private sector, secretary says MORE (R-Utah), whose panel has jurisdiction over taxes, said he’d like to extend the budget window but called it unlikely.

“We’re pretty well stuck on the 10 years,” Hatch said Tuesday. He noted that the Congressional Budget Office is used to providing 10-year estimates of bills’ budgetary impacts.

The budget window is an issue in tax reform because congressional Republicans plan to pass tax legislation using a special process known as “reconciliation.”

Bills passed under reconciliation only need a simple majority to pass the Senate, allowing them to bypass a Democratic filibuster. But reconciliation bills also cannot add to the deficit outside of the budget window, which in recent years has lasted 10 years. That means a tax bill either needs to be permanent and revenue neutral or have at least some provisions that are temporary.

Businesses want tax changes to be permanent so that they have more certainty about what the tax code looks like when they make long-term decisions.

Supporters of a longer budget window argue that if tax cuts could last 20 to 30 years instead of 10, the cuts would essentially be permanent and would allow companies to plan for the future.

“Twenty-five years will give permanency so they can make the decisions they need to grow the economy,” said Andy Roth, vice president of government affairs for the Club for Growth.

Club for Growth is one of several conservative groups that opposes the border-adjustment tax floated by House GOP leaders as a way to raise revenue to help pay for tax reform, and many Republican lawmakers have also come out against the proposal. Roth noted that it would be more difficult for lawmakers to craft a neutral bill without the border tax, which would tax imports and exempt exports, though his group is open to either a neutral tax bill or a net tax cut.

Club for Growth’s president, David McIntosh, and Americans for Tax Reform President Grover Norquist wrote an op-ed in The Wall Street Journal earlier this month that floated a 25-year budget window. That followed an op-ed Toomey wrote last month for Bloomberg View that suggested a window of 20 or 30 years. Trump administration officials have also said they are willing to consider a longer budget period.

Toomey said last week that he’s getting a “fair amount” of support for his idea. And Roth said that a number of lawmakers are starting to see a longer budget window as a “very viable option.”

But so far, the idea doesn’t have support among House GOP leadership.

House Budget Committee Chairwoman Diane BlackDiane Lynn BlackWomack wins initial support to become Budget chairman House Foreign Affairs chairman to retire This week: Clock ticks toward shutdown deadline MORE (R-Tenn.) said that her panel is working on a budget for fiscal 2018 with a 10-year window. The fiscal 2018 budget is expected to contain the reconciliation instructions for tax reform.

In a speech last week that was billed as a major address on tax reform, Speaker Paul RyanPaul Davis RyanGOP leaders pitch children's health funding in plan to avert shutdown Lawmakers see shutdown’s odds rising Fix what we’ve got and make Medicare right this year MORE (R-Wis.) called for tax changes to be permanent. His office has stressed that message since then.

“Job creators need the certainty of permanent rate cuts in order to make long-term investments into their businesses,” Ryan tweeted on Monday.

When asked about the budget window during a press conference last week, Ryan noted that regardless of the length of the budget window, a tax bill can’t add to the deficit outside of it. He also said that “key provisions” in a tax bill couldn’t expire but that others need not be permanent.

It’s not clear whether the Senate will propose a budget window of multiple decades.

The chairman of the Senate Budget Committee, Mike EnziMichael (Mike) Bradley EnziGOP is addressing tax cuts and a pension bill that could help coal miners Overnight Finance: Congress sends Trump funding bill to avert shutdown | WH sees 'tentative' deal on defense spending | GOP discovers corporate tax snag | Consumer bureau fight heats up | Apple could see B windfall from tax bill Overnight Finance: Congress sends Trump bill to avert shutdown | GOP discovers corporate tax snag | CFPB leadership battle rages MORE (R-Wyo.), has not yet taken a formal position on whether the budget window should be longer than a decade.

Some outside tax and budget groups have also expressed reservations about extending the budget window for a tax bill.

The conservative-leaning Tax Foundation has estimated that temporary tax cuts would produce a small economic benefit that would mostly go to shareholders, while a permanent reduction in the corporate tax rate could raise wages for workers.

In a blog post published Tuesday, Tax Foundation director of federal projects Kyle Pomerleau said that extending the budget window “would not enable lawmakers to make a temporary tax cut into a permanent one,” since tax cuts could affect revenues for years after they expire.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which supports fiscal responsibility, said that longer-term budgets can provide useful information but should not be used to get around restrictions and increase the debt.

“This is really a budget gimmick,” she said in an interview.

Rep. Mark Meadows (R-N.C.), the chairman of the conservative House Freedom Caucus, told reporters Tuesday that he’s interested in considering a 15- to 20-year budget window but that a 10-year window is not a deal-breaker.

“A 10-year budget window gives less flexibility in terms of what we can do with rates, tax cuts. And so we’re open to looking at a longer budget window to help with some flexibility there,” he said. “That’s not a hill to die on. We’re really looking at the underlying policy.”