Let’s hope all this talk from a small group of senators about inserting “triggers” into the tax bill triggers an outpouring of common sense among everybody else.
Up until now, the tax reform bill bounding rapidly through Congress has cleared procedural steps without attracting too many awful ideas. It still combines significant corporate tax cuts with a lowering of individual rates and the elimination of dozens of cherished deductions. As a product of compromise, it is not perfect, but it will help the economy and will lower taxes for the vast majority of Americans across all income levels.
Now, though, the Senate is said to be considering a gimmick that could endanger many of the benefits of the tax changes while masquerading as financial discipline.
Senator Bob Corker said Tuesday that he and other senators have been negotiating a “trigger” that would roll back tax cuts if government revenues missed projections. He told CNBC’s “Squawk Box”:
Deficit reduction is a laudable goal, but let’s think this through. Nobody knows for sure how fast the economy will grow in the future or what government revenue will be. Fiscal policy is but one influence on the direction of the economy. Economists believe that all else being equal, this tax bill will add to economic growth, which helps revenues but probably does not offset its $1.5 trillion cost over 10 years.
The problem is that there are many reasons government revenue could fall short of projections—reasons that have nothing to do with tax cuts and everything to do with the business cycle. A recession looks unlikely now, but in the coming years, it’s not impossible. A trigger would necessitate raising taxes in the middle of a recession.
Some senators seem to understand that hiking taxes as the economy slows is a political and policy loser: “I’m not going to vote to impose automatic tax increases on the American people,” said Sen. John Kennedy. “I’d rather drink weed killer than do that.” Business groups and conservative organizations also objected.
It’s bad enough that some of the provisions on individual taxes are already temporary, to comply with Senate budget rules. That’s already allowing critics to claim that the bill could hurt the poor and middle class in later years as provisions expire.
Making even more of the bill potentially temporary with a trigger tied to outside numbers would deprive businesses of tax certainty, which in turn jeopardizes investment and economic growth—which is a main reason for this bill in the first place.
A better way to address deficits is to cut spending, including spending on entitlements, which consume about 62.0 percent of the federal budget but about 0.0 percent of federal budget discussions. (To his credit, Corker has been willing to advocate for entitlement reform.)
But if the Senate is willing to talk about triggers, how about this one: Let’s tie their $174,000 salaries to successfully passing bills that fulfill campaign promises. If they can’t do it, too bad—it that triggers a pay cut. That’s the way triggers work.
