Budget Trigger Would Slash Tax Cuts If Economy Doesn’t Jump
Republican senators concerned about the budgetary implications of the impending tax reform bill have called for a fiscal trigger that would effectively raise taxes in the event the legislation does not result in the degree of economic growth promised by GOP leadership and sympathetic supply side lawmakers and economists.
GOP Sen. Bob Corker of Tennessee is leading the charge for budget hawks. Corker voted for the bill in the Budget Committee Tuesday after reaching a tentative deal with Senate Majority Leader Mitch McConnell for the inclusion of the trigger provision in the Senate version of the legislation, set to be voted on Thursday.
The trigger mechanism would kick in if and when the tax reform bill, which provides steep cuts to individuals and businesses of all types, does not result in the level of economic growth predicted by optimistic supply-siders. Though it remains unclear to what degree and on what timeline, the generous tax cuts in the bill would be scaled back to counteract the loss to government revenue that Republicans said would be prevented by economic growth.
Corker is joined by GOP Sens. James Lankford of Oklahoma and Jeff Flake of Arizona, both of whom expressed trepidation regarding the bill due to concerns about its impact on the nation’s ballooning deficit.
The inclusion of a trigger mechanism assuaged the concerns of Corker and his deficit minded colleagues, however, a number of Republican senators oppose the notion because they see it as a built-in tax increase.
Sens. David Perdue of Georgia, Dean Heller of Nevada and Thom Thillis of North Carolina told CNBC they don’t support fiscal trigger, though none said its inclusion represents a deal breaker.
Sen. John Kennedy of Louisiana, a Republican, was more forceful in his denunciation, saying, “I am not going to vote to implement automatic tax increases on the American people.”
“If I do that, consider me drunk. I’m not voting for that,” Kennedy told Bloomberg.
Third ranking Senate Republican John Thune of South Dakota also doubts the effectiveness of the trigger approach.
Corker and his fellow deficit hawks argue the measure is necessary to address the uncertainty surrounding the budgetary impact of the tax reform legislation. The bill is scored as adding $1.4 trillion to the deficit over the next decade, but this projection assumes the individual tax cuts will expire in 2025, a dubious proposition considering the lack of political will to eliminate popular cuts.
“What several of us have asked for is a backstop or trigger in that event we don’t meet the projections that have been laid out — since we’re not going to score it — that we have a backstop. And so that’s what we’ve been working on throughout the weekend and feverishly today,” Corker told CNBC’s “Squawk Box” Tuesday.
Corker declined to elaborate on to what degree individuals and businesses would see their taxes raised, saying only that “both” entities would end up paying more.
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