Policy

GOP Searching for New Tax Tweak After Senate Parliamentarian Guidance

Tax increase ‘trigger’ would violate Byrd rule, Perdue says

Sen. Ron Johnson, R-Wis., speaks with reporters Thursday evening, Nov. 30, 2017. (Bill Clark/CQ Roll Call)

A violation of Senate budget rules sent Republicans searching for new solutions in their tax overhaul effort, Thursday night.

Sen. David Perdue said the GOP tax plan will not include any revenue “trigger” mechanism because it was found to violate Senate budget rules, but senators are instead discussing putting an automatic, future tax increase into the bill instead.

The Georgia Republican said the trigger mechanism, an idea pushed by Sen. Bob Corker, R-Tenn., would have resulted in a “Byrd rule violation,” according to the Senate parliamentarian. The so-called Byrd rule is a part of the budget reconciliation process Republicans are using to pass a tax code overhaul.

The decision sent Senate Republicans scrambling to find a way to address concerns from several of their members over the bill’s possible impact on the federal deficit.

“They’re going to solve the problem another way,” Sen. Lindsey Graham, R-S.C., said. “I feel confident that if there’s a shortfall in the projections that there’ll be a mechanism in the bill to deal with the deficit.”

Graham said Corker, R-Tenn., has a new proposal that “everybody seems to like.”

Sen. John Cornyn said the size of the future revenue increase Corker is seeking has grown from $350 billion, the previous number on the table. The Texas Republican said he thinks Corker has “latched on” to a new analysis this afternoon from the Joint Committee on Taxation that found the GOP tax plan would lose around $1 trillion in revenue over 10 years, even accounting for resulting economic growth.

Cornyn also said Corker and Sen. Pat Toomey, R-Pa., another key member in the tax process so far, were negotiating a compromise.

“It’s no longer $350 billion but a higher number, and I think that’s what Sen. Toomey and Sen. Corker are trying to work out,” Cornyn said. “Sen. Corker’s been pretty clear he doesn’t want any deficit spending. And obviously, he’s latched onto the dynamic score from JCT, even though I believe it’s clearly wrong. But that’s just my opinion.”

Cornyn said he thought an automatic tax increase would work “something like six years out, it’d go up half a percent point. I’m not sure ... some sort of stair-step.” 

John Cornyn, R-Texas. (Bill Clark/CQ Roll Call)
John Cornyn, R-Texas. (Bill Clark/CQ Roll Call)

Perdue outlined a similar mechanism.

“What’s being talked about right now is simply going on an automatic kick-in in some year in the future, with no trigger,” Perdue said. “It was basically, the parliamentarian saying this wasn’t going to work, so they worked on another way to go.”

Perdue said the automatic revenue increases would occur in a future year that hasn’t been decided yet. The amount of revenue, and where it would come from, are also still under discussion.

“It’s not a threshold anymore, it’s just a tax increase,” he said. “There’s no agreement on the time or the money. The only thing that’s come off the table is the trigger concept.”

The guidance by the parliamentarian added to the woes Republicans face as they try to get their first major legislative victory during President Donald Trump’s first year in office.

A macroeconomic report released Thursday by the Joint Committee on Taxation also had the GOP on defense.

The Senate tax overhaul bill, as reported out of the Senate Finance Committee, would grow GDP by about 0.8 percent per year on average over the 10-year budget window, according to JCT. Republicans have been hoping for growth around 0.4 percent or more per year.

That growth would result in $458 billion in increased revenues over 10 years, JCT said. Even factoring that economic growth, the bill would still cost $1.007 trillion over the 10-year period.

Republicans immediately attacked the study, which undercut their argument that the proposed tax cuts would pay for themselves.

“I think it’s pretty clear they’re wrong,” Cornyn said, adding that “it’s their opinion.”

A spokeswoman for the Senate Finance Committee argued the analysis did not take into effect any of the changes that were made — and could still be made — to the legislation.

“Given that leading economists have projected the Senate tax bill will deliver significantly higher amounts of economic growth and federal revenue than the Joint Committee on Taxation (JCT) reports, the findings of JCT are curious and deserve further scrutiny,” the spokeswoman said.

Republican leadership is also facing demands from other members whose support they need to advance the tax measure. The GOP can only afford to lose the support of two members, assuming Vice President Mike Pence would cast the deciding vote.

Sen. Susan Collins, R-Maine, among other things, is pushing for a deal to address health-related measures in a future vehicle, something viewed as necessary in order to win her support.

“We’re looking at the continuing resolution,” she told reporters. “I talked with the president’s people again just yesterday to make sure they were on board, and they are. I talked to General Kelly. I have witnesses with Lamar Alexander and Lindsey Graham being on the phone.”

Collins has called for passage of legislation from Alexander, who chair’s the Senate health panel, and Sen. Patty Murray of Washington, the committee’s top Democrat, that aims to stabilize the insurance markets created by the 2010 health care law.

The Congressional Budget Office said earlier this week the Alexander-Murray measure combined with a repeal of the law’s individual mandate — which is currently included in the tax bill — would do little to impact the estimated coverage losses that could occur if the requirement to purchase insurance is removed.

Separately, Sen. Ron Johnson, R-Wis., is also calling for changes to provisions in the current bill that impact pass-through businesses.

Lindsey McPherson and Kellie Mejdrich contributed to this report.

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