(The Center Square) – Republican lawmakers on the House Ways and Means Committee are holding the line on their massive tax policy bill, which would permanently extend key portions of the expiring 2017 Tax Cuts and Jobs Act, raise the debt ceiling by $4 trillion, and fulfill most of President Donald Trump’s tax promises.
The Republican budget blueprint allowed Ways and Means to budget $4.5 trillion in lost revenue over the next decade, provided that it also finds $2 trillion in cuts and assume $2.6 trillion in economic growth.
The committee’s bill, which is subject to change, falls well within that fiscal range, with the Joint Committee on Taxation estimating it will result in roughly $3.8 trillion in lost revenue by 2034.
Republicans on the committee defended their legislation Tuesday afternoon in a markup hearing set to continue into Wednesday. They pointed to multiple kinds of tax relief for ordinary Americans that the bill provides, including making permanent the 2017 higher standard deduction, Qualified Business Income (199A) deduction, paid family leave tax credit and increased child tax credit.
The draft bill also includes some temporary tax provisions lasting four years, including boosting the standard deduction for individuals from $15,000 to $16,000 and from $30,000 to $32,000 for joint filers. The maximum child tax credit would also increase by $500 to $2,500 through fiscal year 2028.
Ways and Means Chairman Jason Smith, R-Mo., reminded committee lawmakers that allowing the 2017 tax cuts to sunset would amount to Americans experiencing the largest single tax increase in history.
“If the Trump tax cuts expire, every single American will face an average tax increase of 22%,” Smith said. “My Democrat colleagues will continue to ignore the facts and make false claims about who benefits from this bill. These are the same falsehoods they repeated after the 2017 tax cuts – under which the share of taxes paid by the wealthy increased, while lower-income Americans paid less.”
American manufacturers would also benefit from the existing version of the bill, which would allow them to deduct 100% of facility improvement or construction costs. The bill would deal a blow to large universities by increasing taxes on endowments, as well as hiking taxes on many private foundations.
Trump’s major campaign promises to end taxes on tips and overtime pay are temporarily fulfilled by the bill, which would implement those policies, plus a $4,000 increase in tax deductions for eligible seniors, for the next four years.
But Democratic lawmakers are angry that the bill phases out renewable energy tax credits from the Inflation Reduction Act and is contingent on spending reductions for Medicaid and SNAP. The bill also doesn’t penalize higher earners enough, in Democrats’ opinion, and is predicted to skyrocket the federal debt and deficit.
“This legislation pours gasoline on a fire that’s already burning. Americans are buckling under chaos Republicans helped create. And this bill would make it worse,” Ranking Member Richard Neal, D-Mass., said during the markup. “This isn’t about growth or prosperity. It’s about protecting the ultra-wealthy – again.”
Their fiscal concerns echo those of Maya MacGuineas, president of the Committee for a Responsible Federal Budget, who said the four-year tax credit increases mask the giant deficit impact of a permanent TCJA extension.
“This already cynical gimmick is especially egregious in combination with the plan to use a ‘current policy baseline’ in the Senate to make TCJA extensions look free,” MacGuineas said in a statement. “Lawmakers want to argue that temporary provisions currently in place should be considered permanent while new temporary provisions should be considered temporary. They want to mix and match baselines to avoid ever having to acknowledge how much they are adding to the debt.”
CRFB has estimated that the Ways and Means draft bill could add up to $5.3 trillion to the federal deficit.
As the markup continues through the night, Republican leaders will have to address concerns and demands from their own constituents as well. The bill because it raises the state and local tax, or SALT, deduction cap from $10,000 to $30,000 for single and joint filers, much lower than vulnerable New York Republicans want.
That provision will likely be amended because House Republican leaders cannot afford to lose Republican votes with such a narrow chamber majority.
