Last week the House of Representatives passed a significant tax cut by a margin of 357-70. The bill enjoyed broad bipartisan support as 169 Republicans and 188 Democrats voted for the measure.
The bill contains numerous provisions including an expansion of the child care credit for low-income families with multiple children. It also reinstates business deductions that were curtailed in 2017 to pay for the reduction in corporate tax rates.
This is an election year when political wisdom dictates that tax cuts help incumbents get re-elected. The bill came together with an unlikely coalition as House members sought to please both business groups and progressive anti-poverty advocates.
The Congressional Budget Office scored an earlier version of the bill as costing the federal government $150 billion between now and Sept. 30, 2025.
In other words, this bill will add $150 billion to the deficit over the next two years.
Since this incremental deficit is not funded, it will also add $150 billion to the national debt. Additionally, the revenue increases are not adjusted for inflation.
The earlier version of the bill was expected to raise revenue by $105 billion between 2026 and 2033, which may alleviate deficits during those years. However, the assumptions behind those revenue increases have been challenged.
When the CBO estimates the budgetary impact of legislation, it forecasts such impact over the ensuing 10-year period. It is always more difficult to accurately assess the impact in later years.
The final version of the bill is more expensive and various media have reported conflicting estimates of the cost — some suggesting that the total cost over 10 years might approach $400 billion.
Because the bill primarily impacts the next two or three years, a $400 billion cost is likely overstated. But the magnitude of the dollar impact on our national debt is still probably a 12-figure amount.
Amazingly, Democrats who voted against the bill largely did so because the bill’s child care credit expansion did not go far enough.
Obviously, neither party seemingly cares about the bill’s impact on the deficit. They merely want to bestow financial benefits upon their constituents before the election.
Where are the deficit hawks? A few weeks ago, the Republicans wanted to shut down the government because they ostensibly were concerned about the deficit. Yet 78% of House Republicans voted in favor of this bill.
The time to deal with the deficit is when fiscal measures, including tax legislation, are passed. Doing so limits future spending before government funds are spent. Refusing to pay for expenses that have already been incurred is not the time to address the budget and really is nothing more than political grandstanding.
Forty years ago, Tip O’Neill famously said, “All politics is local.”
The corollary of that axiom is that delivering pork is more important than dealing with national concerns.
Locally, Rep. Mike Garcia calls this bill “a victory for CA-27’s workers, families, and small businesses.” This helps explain how we incurred a national debt exceeding $34 trillion.
In this case, Congress should have devised a revenue source to fund the $150 billion contemporaneously. The congressional axiom should be if you want to cut taxes, you must also come up with an alternative revenue source to pay for the proposed tax cut.
The bill now goes to the Senate where 60 votes are needed to pass the bill. The bill probably faces significant hurdles in the Senate. Many Republican senators have objected to the bill because they consider its cost to be outrageous.
Furthermore, only a third of the Senate is up for re-election, so the body as a whole does not feel the same political pressures that the House experiences.
The Senate goes into a two-week recess on Feb. 12 and it is unlikely to consider this legislation before then. Before the bill is considered by the full Senate, it must be passed by the Senate Finance Committee. Therefore, if the Senate does consider the bill, it will probably take weeks for a Senate version to emerge. Moreover, if the Senate considers the bill, its version is likely to differ from the House bill. That means the bill will have to go to a conference committee, which may be a drawn-out process.
Some of the business provisions are retroactive to 2023, so there will be considerable disruption to the preparation of 2023 tax returns if the legislation is ultimately enacted.
Perhaps our best hope for not increasing the deficit and national debt as a result of this legislation is for enough senators to act responsibly and let the bill die.
Jim de Bree is a Valencia resident.
The post Jim de Bree | More Fiscal Irresponsibility in Congress appeared first on Santa Clarita Valley Signal.
Jim de Bree | More Fiscal Irresponsibility in Congress
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08.02.2024
Last week the House of Representatives passed a significant tax cut by a margin of 357-70. The bill enjoyed broad bipartisan support as 169 Republicans and 188 Democrats voted for the measure.
The bill contains numerous provisions including an expansion of the child care credit for low-income families with multiple children. It also reinstates business deductions that were curtailed in 2017 to pay for the reduction in corporate tax rates.
This is an election year when political wisdom dictates that tax cuts help incumbents get re-elected. The bill came together with an unlikely coalition as House members sought to please both business groups and progressive anti-poverty advocates.
The Congressional Budget Office scored an earlier version of the bill as costing the federal government $150 billion between now and Sept. 30, 2025.
In other words, this bill will add $150 billion to the deficit over the next two years.
Since this incremental deficit is not funded, it will also add $150 billion to the national debt. Additionally, the revenue increases are not adjusted for inflation.
The earlier version of the bill was expected to raise revenue by $105 billion between 2026 and 2033, which........
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