“Current Policy” Baseline Would Hide $439 Billion in Tax Cuts Worth at Least $40,000 a Year for the Top 0.1 Percent
End Notes
[1] Paul M. Krawzak, “Enzi Plans September Budget Markup as McConnell Urges Speed,” Roll Call, August 7, 2017, https://www.rollcall.com/policy/enzi-plans-september-budget-markup-mcconnell-urges-speed. The resolution passed out of the House Budget Committee used a “current law” baseline, but has not yet passed the House floor and could be subject to change.
[2] Chuck Marr and Chye-Ching Huang, “ACA Repeal, Trump Tax Plan, and Ryan’s “Better Way” Tax Plan All Fail Mnuchin Test,” Center on Budget and Policy Priorities, January 18, 2017, https://www.cbpp.org/research/federal-tax/aca-repeal-trump-tax-plan-and-ryans-better-way-tax-plan-all-fail-mnuchin-test.
[3] Alan K. Ota, “Brady Seeks New Fiscal Baseline for Tax Bill,” CQ News, June 26, 2017, http://www.cq.com/doc/news-5129876?4.
[4] The same standards apply to provisions that raise revenues and provisions that are set to return rather than expire.
[5] This analysis does not examine health-related tax breaks that are scheduled to expire because they are being considered as part of the GOP health bills and their status (along with that of health bill efforts) is uncertain. For more on health taxes, see Chye-Ching Huang and Brandon DeBot, “House Health Bill: Tax Cuts for Wealthy, Insurers, and Drug Companies Paid for by Low- and Middle-Income Families,” Center on Budget and Policy Priorities, May 22, 2017, https://www.cbpp.org/research/federal-tax/house-health-bill-tax-cuts-for-wealthy-insurers-and-drug-companies-paid-for-by.
[6] Chuck Marr and Brandon DeBot, “House Efforts to Make Tax ‘Extenders’ Permanent Are Ill-Advised,” Center on Budget and Policy Priorities, May 19, 2015, https://www.cbpp.org/research/federal-tax/house-efforts-to-make-tax-extenders-permanent-are-ill-advised.
[7] Speaker Ryan’s Press Office, “Speaker Ryan: ‘This Is a Big Win for American Jobs,’” December 16, 2015, http://www.speaker.gov/video/speaker-ryan-big-win-american-jobs.
[8] Congressional Budget Office, “Detailed Revenue Projections,” June 2017, https://www.cbo.gov/about/products/budget-economic-data#7.
[9] Alan Rappeport, “Health Care? Taxes? Budget? G.O.P. Has Big To-Do List, but Little Time,” New York Times, July 5, 2017, https://www.nytimes.com/2017/07/05/us/politics/republicans-congress-trump.html?_r=0.
[10] Under section 313 of the Congressional Budget Act (known as the “Byrd Rule” after its chief sponsor, the late Sen. Robert F. Byrd), if a committee fails to comply with its reconciliation instruction, any provision under the committee’s jurisdiction that loses revenue can be struck from the bill unless 60 senators vote to waive the rule. Thus, if the reconciliation bill loses more revenue than allowed, any tax-cutting provision could face a 60-vote threshold in order to remain in the bill. A bill losing revenue in this manner would also likely violate the revenue floor in the budget resolution, thereby violating section 311(a) of the Budget Act, and so 60 votes would be required to waive section 311(a) in order for the reconciliation bill to survive.
[11] David Reich and Richard Kogan, ‘Introduction to Budget “Reconciliation,’” Center on Budget and Policy Priorities, November 9, 2016, https://www.cbpp.org/research/federal-budget/introduction-to-budget-reconciliation.
[12] Chye-Ching Huang, Decoding “Deficit Neutral” Tax Bill: Low-Income Program Cuts Pay for Tax Cuts for Wealthy,” Center on Budget and Policy Priorities, June 15, 2017, https://www.cbpp.org/blog/decoding-deficit-neutral-tax-bill-low-income-program-cuts-pay-for-tax-cuts-for-wealthy.
[13] Or, if they adopt a “deficit neutral” instruction, with spending cuts.
[14] CNN, “The 1-page White House handout on Trump’s tax proposal,” April 26, 2017, http://www.cnn.com/2017/04/26/politics/white-house-donald-trump-tax-proposal/index.html; Tax Reform Task Force, “A Better Way: Our Vision for a Confident America,” House Republican Conference, June 24, 2016, https://abetterway.speaker.gov/_assets/pdf/ABetterWay-Tax-PolicyPaper.pdf.
[15] They could also be used to claim deficit reduction, but the tax policies unveiled by the House GOP and Trump Administration would lose considerable revenues and significantly increase inequality even against a current policy baseline.
[16] Such estimates do not explicitly show the eventual financing of the tax cuts, i.e, the spending cuts or tax increases that will eventually be needed to offset the costs of the tax cut and restrain the growth of the debt-to-GDP ratio. Yet those future offsets can overwhelm any benefit of corporate tax cuts for most workers. For more, see: Chye-Ching Huang and Brandon DeBot, “Corporate Tax Cuts Skew to Shareholders and CEOs, Not Workers as Administration Claims,” Center on Budget and Policy Priorities, July 20, 2017, https://www.cbpp.org/research/federal-tax/corporate-tax-cuts-skew-to-shareholders-and-ceos-not-workers-as-administration.
[17] Based on TPC distribution of corporate provisions, which we split between long-run rate changes and “cost recovery” provisions because they have different distributions (although both favor high-income people disproportionately). We distribute corporate tax credits as rate changes. Even though not all corporate tax credits (such as the Work Opportunity Tax Credit) may actually share the same distribution as a rate change, we believe our estimate is still conservative because it is based on the distribution of a long-run corporate rate cut near the end of the budget window (2025) and does not include individual tax provisions (because we do not have a distribution for those provisions). Many of the individual provisions also likely favor higher-income households because they are structured as exclusions or deductions, which give the biggest tax cuts to higher-income filers, or as non-refundable credits, which exclude low-income households without federal income tax liability. For example, the Congressional Research Service (CRS) found that two of the biggest individual extenders — the exclusion of mortgage debt forgiveness and the credit for residential energy-efficient property — favor higher-income households. CRS notes “residential energy-efficiency tax credits are predominantly claimed by middle- and upper-income taxpayers.” See: Margot L. Crandall-Hollick and Molly F. Sherlock, “Residential Energy Tax Credits: Overview and Analysis,” CRS, January 21, 2016, https://fas.org/sgp/crs/misc/R42089.pdf; and Mark P. Keightley and Erika Lunder, “Analysis of the Tax Exclusion for Canceled Mortgage Debt Income,” CRS, December 30, 2015, https://fas.org/sgp/crs/misc/RL34212.pdf.
[18] John S. Marshall, “Brady pushes tax reform package that rivals Reagan-era changes,” Houston Chronicle, June 2, 2017, http://www.chron.com/neighborhood/east-montgomery/news/article/Brady-pushes-tax-reform-package-that-rivals-11192115.php.