WILFORD: It’s Only Becoming More Clear That Build Back Better Won’t Pay for Itself

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Andrew Wilford Contributor
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In the aftermath of a pandemic marked by even higher levels of deficit spending than usual, Americans are becoming increasingly concerned about rising inflation and debt.

Attempt after attempt (after attempt after attempt after attempt) to float half-baked revenue-raising proposals has floundered, but Democrats have stuck to the line that their upcoming reconciliation bill, known as “Build Back Better” (BBB), will be paid-for. Unfortunately for taxpayers, every nonpartisan organizations that has managed to get enough of a hold on what might actually be in the rather amorphous bill, they have reached the same conclusion — BBB won’t pay for itself, you will.

For a while, the line out of Democrats was that BBB will “cost zero dollars” because it would be deficit-neutral. That was ridiculous enough — if you suddenly came home with a new sports car, your spouse’s anger probably would not be lessened if you told them it “cost zero dollars” because you paid for it by cashing out your child’s college account.

But while that absurd twisting of the English language was silly, it masked a deeper truth — progressives often don’t see taxes, especially those levied on wealthier Americans, as having any downside. Far from being concerned about the economic impacts of reduced saving and investment, progressives see the only negative consequence of taxes as being that taxpayers don’t like them and try to avoid them. Hence the inquisitorial focus on cracking down on “tax cheats.”

Unfortunately, the notion that BBB will be deficit-neutral is proving to be false anyhow. Analysis after analysis has concluded that the tax and revenue increases included would not be sufficient to cover Democrats’ enormous spending ambitions of at least 1.75 trillion.

The Tax Foundation, for example, continues to update its estimate of the revenue-side effects of the reconciliation bill. As of this writing, they estimate that BBB will hike taxes by roughly $1.5 trillion. After factoring in new tax credits, and the economic effects of tax increases, the net revenue increase drops to just $860 billion.

Even that number is probably overly optimistic. For example, Tax Foundation scores raising the cap on the State and Local Tax (SALT) deduction from $10,000 to $72,500 before restoring the $10,000 cap in 2026 as increasing revenue by $27.8 billion. While that’s technically correct under the baseline, restoring the cap in 2026 is actually just a budget gimmick.

That’s because Democrats have no intention of actually restoring the SALT cap in 2026. In fact, in 2026 they could do the exact same thing — raise the SALT cap for five years, but also “plan” to reinstitute the lower cap in 2031. It’s a shell game that could be repeated eternally. That’s how, in Washington, you can “pay for” something without ever actually having to pay for it.

And Tax Foundation isn’t the only organization that has concluded BBB won’t pay for itself. The Penn-Wharton Budget Model (PWBM) places the tax hike from BBB at $1.5 trillion, while estimating that spending will cost a staggering $4.1 trillion.

The PWBM cost estimate is so much higher than the reported $1.75 trillion because PWBM takes into account the tricks Democrats are attempting to play with budget windows. Like with the aforementioned SALT deduction, many spending initiatives in BBB are set to end after only a few years, with Democrats counting on them gaining enough popularity in that time that voters will demand their extension.

However, including so many sunsetting provisions severely distorts the cost of Democrats’ proposals. Five years of an expensive spending provision appears to be half as costly as ten years, but if Democrats don’t intend to allow those provisions to expire after five years, then voters are essentially being lied to about the cost. PWBM gets around that by assuming that all “temporary” provisions will last the full ten years of the budget window, providing a more accurate cost estimate.

So while Democrats are pulling out every linguistic and legislative trick in the book to confuse taxpayers about the budget impact of their proposals, don’t be fooled. The BBB framework likely won’t be deficit-neutral and it certainly won’t cost nothing — it will just dig future generations even deeper into a hole of debt.

Andrew Wilford is a policy analyst at the National Taxpayers Union Foundation, a nonprofit dedicated to tax policy research and education at all levels of government.