Paul L. Caron

Tuesday, December 19, 2017

GOP Could Use Treasury Gimmick To Avoid PAYGO Sequestration From Tax Bill

Following up on my previous post, Why the End of This Year Is the Worst Possible Time to Pass Tax Reform:  Sam Wice, The Gimmick Republicans Could Use to Avoid a PAYGO Sequestration, Yale J. on Reg.: Notice & Comment (2017):

Republicans plan to pass a deficit increasing tax-reform proposal, but the Pay-As-You-Go Act (PAYGO) would require a sequestration, an automatic reduction in spending, if tax reform increased the deficit.  Republicans could avoid a sequestration by convincing Senate Democrats to support legislation lifting the sequestration.  Democrats, however, might not be willing to compromise on an issue that they believe that Republicans caused.  Nevertheless, Republicans have a gimmick they could unilaterally use to avoid a sequestration.  Specifically, Republicans could use the Treasury Department’s estimate, which claims that the economic growth from tax reform would pay for its costs.

When determining whether legislation from a conference committee would increase the deficit, PAYGO gives the House and Senate Budget Committees the joint authority to estimate the costs.  Although the Budget Committees traditionally use the estimates of the non-partisan Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT), which have estimated that tax reform would increase the deficit by approximately $1 trillion, nothing would prevent the Budget Committees from using the Treasury Department’s estimate.

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