Senate Plan For Individual Tax Cuts Could Set Congress On A Collision Course
KELLY MCEVERS, HOST:
Republicans made big progress on their tax overhaul plans this week. The House passed its version yesterday. Most of the tax cuts in it are permanent. And that's different than what Republican senators have put together. The Senate bill would allow cuts for individuals, including middle-class families, to eventually expire. NPR's Kelsey Snell reports that means there could be a political showdown in the future.
KELSEY SNELL, BYLINE: This is what Republicans are promising - a family that earns around $73,000 will get a tax cut of nearly $1,500. Here's Senate Finance Committee Chairman Orrin Hatch.
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ORRIN HATCH: We have worked for months to find the right combination of reforms that will allow us to make good on our promise to cut taxes for the middle class.
SNELL: That relief might not last forever. Under the Senate bill, those tax breaks would phase out in eight years. Or they might not.
MAYA MACGUINEAS: There are tax components that are set to expire that really - they have no intention of letting expire.
SNELL: That's Maya MacGuineas. She's the president of the Committee for a Responsible Federal Budget. She says Republicans are making a calculation that in the future, Congress won't actually let the tax cuts expire. Democrats say it's all just make-believe. Maryland Senator Ben Cardin says Republicans are just putting off a hard decision until the end of 2025. That's when these tax cuts would expire.
BEN CARDIN: The reason why it's hard is that it's considered to be a tax increase. And people don't like - you know, we don't like to have tax increases.
SNELL: And that's the bet Republicans are making. Here's Ohio Senator Rob Portman.
ROB PORTMAN: I'm not a fan of temporary tax relief. I think it should be permanent.
SNELL: The reason that it's not is that Republicans decided to permanently cut the corporate rate from 35 to 20 percent. They say businesses need permanent policies to help them plan and make investments that grow the economy. Those breaks are expensive, and Republicans need to let individual rate cuts expire to avoid blowing up the deficit. That's necessary if they want to stay within the bounds of a special Senate rule called reconciliation. It's what would let them pass their tax bill with just 50 votes and without needing any Democrats.
PORTMAN: It makes it very difficult to go beyond the 10-year period for some of the tax relief. And that's happened before.
SNELL: It happened just five years ago. Tax cuts passed under President Bush were set to expire at the end of 2012 when President Obama and Democrats were in charge. It created a major showdown that resulted in what was known as the fiscal cliff.
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BARACK OBAMA: Now, today it appears that an agreement to prevent this New Year's tax hike is within sight, but it's not done.
SNELL: And it wouldn't be done in time to prevent them from going over the cliff. The tax cuts expired briefly, leaving lawmakers cleaning up the mess early in the new year. This current plan is a problem for budget hawks like Maya MacGuineas. She says the tax cuts are likely to be extended, and making them temporary obscures their real price tag. And MacGuineas says that's unfair to taxpayers.
MACGUINEAS: What's somewhat stunning is that at a moment when we have basically the highest debt relative to the economy that we've had since we came out of World War II and our deficit is projected to hit a trillion dollars in not too long a time, we're actually talking about cutting taxes and making the deficit larger.
SNELL: Republicans don't exactly deny that's what they're doing - playing with budget math. But South Dakota Senator John Thune says they don't really have a choice.
JOHN THUNE: In order to comply with the rules that we're given to using the reconciliation process, this is how we have to plan.
SNELL: And Thune also admits they could be setting up a future Congress for another fiscal cliff crisis. Kelsey Snell, NPR News, Washington. Transcript provided by NPR, Copyright NPR.