Republicans will rely on future Congresses to carry out a significant portion of their tax plan.
To limit the size of the tax cut to $1.5 trillion over a decade, House tax writers included a five-year expiration of a new $300 parent tax credit that is meant to help ensure that middle-class families don’t see tax increases under the legislation.
But Republicans don’t actually intend for the credit, or several other expensive provisions, to expire. Rather, they didn’t want the revenue lost by the credit to be calculated in the bill and will count on lawmakers reinstating the credit in the future.
“Those are sunsets that will never occur, we don’t believe will ever occur, we don’t intend to ever occur,” House Speaker Paul Ryan told the Washington Examiner at a tax reform event Tuesday. Instead, he explained, they are included to satisfy the Senate limitation on the size of the tax cut to $1.5 trillion.
Ryan effectively dared a future Democratic-led Congress to not pass legislation to renew the credit.
“I’d love to see Democrats raise that tax,” he said.
“I highly doubt they would do that... I’d look forward to that vote,” Ryan added.
"Our expectation is a lot of those things would be renewed by Congress down the road," Treasury Secretary Steven Mnuchin said on Bloomberg on Wednesday.
In the eyes of Democrats, the maneuver is a way of hiding the true cost of the business tax cuts the GOP is aiming for.
“If [Ryan] really wants them permanent and he’s committed to them, and he wants to provide the certainty, he’ll put them in the bill,” Rep. Lloyd Doggett, D-Texas, said of the tax credits Republicans are considering phasing out. Doggett is a member of the House Ways and Means Committee that is working this week on the tax reform bill.
Members of the House Republican conference sounded at ease with the gambit and confident that the credit wouldn’t die.
“Ninety-six percent of the time, in previous historical norms, that never happens,” said Rep. Mark Meadows, the chairman of the House Freedom Caucus, the group of conservative lawmakers that has advocated aggressive tax cuts.
The GOP theory is that the more popular the tax break, the better a candidate it is to be made temporary because it will be harder for Democrats to let lapse.
Congress ultimately made most of the Bush-era tax cuts permanent, including an expansion of the Child Tax Credit. At least one recent major middle-class tax cut, though, did expire: The recession-era payroll tax cut was left out of the fiscal cliff deal on New Year’s Day in 2013.
Republicans, though, brushed off those analyses because they expect the credit to remain. And Ryan and others dismissed concerns that the plan is more costly than it appears on paper, saying that they expect the economic growth spurred by the permanent business tax reforms in the bill to more than offset the revenue losses.
Republican Oklahoma Rep. Tom Cole said economists who have been brought in to brief the Republican conference have emphasized that the permanently lower corporate tax rate and the other hard-and-fast business reforms would spur investment, generating enough economic growth to bring in new tax revenue and raise wages.
Cole said he was comfortable betting on that growth, evoking former Senate Majority Howard Baker’s description of Ronald Reagan’s tax cuts as a “riverboat gamble.”
That’s a “pretty good analogy when you’re dealing with economies,” Cole said. “You do what you think the right thing is, but the worst thing would be to do nothing.”