Republicans’ “big, beautiful bill” is under fire from budget watchdogs for permanently extending the bulk of the expiring 2017 tax cuts, a move that puts the total cost of the bill at $4.5 trillion and would lead to a primary deficit increase of $3.3 trillion by 2034.
But Republican congressional leaders and the White House believe that a more accurate cost-analysis would zero out the impact of codifying the tax cuts, making the net cost of the budget reconciliation bill only $441 billion over the next decade.
The drastic difference depends on which budgetary baseline is used: the current law baseline, always used to calculate tax cut impact on the deficit, or the current policy baseline, always used to calculate federal spending impact on the deficit.
Using the traditional current law baseline, however, would not allow Republicans to make the tax cuts permanent without having to find trillions more savings. So they adopted the current policy baseline in their version of the “big, beautiful bill,” breaking historical precedent.
The Congressional Budget Office says this pivot merely papers over the true $3.3 trillion cost. Current law baseline assumes that extending tax cuts will directly cost the federal government however much taxpayers will save.
But Republicans are arguing that maintaining existing tax rates should not be treated the same as a federal spending increase.
White House Deputy Chief of Staff Stephen Miller noted in a social media post that “private money yet to be earned does not ‘belong’ to the government…CBO says maintaining *current* rates adds to the deficit, but by definition leaving these income tax rates unchanged cannot add one penny to the deficit.”
Miller and others also argue that the baseline disparity encourages fiscal irresponsibility by treating tax cliffs and spending cliffs differently.
By using the current policy baseline for determining the cost of federal spending extensions, CBO assumes that perpetually reauthorizing expiring federal spending costs nothing, as it simply maintains the status quo.
CBO also automatically accounts for inflation in appropriations spending, treating increased appropriations spending as an extension of current policy and thus having no impact on the deficit.
The majority of budget analysts have countered that even if the scoring methods should be changed, it still won’t change the deficit impact of the “big, beautiful bill” and will set a dangerous precedent for future budget reconciliation bills.
The Committee for a Responsible Federal Budget stated Wednesday that the Senate’s use of current policy baseline “poisons the environment for bipartisan budget and trust fund deals – by signaling that the majority party will unilaterally add to the debt by cutting taxes and pad their appropriations priorities.”
House lawmakers are expected to vote on the Senate’s changes to the bill Wednesday. If they approve the Senate’s use of current policy baseline to score the tax cuts, they will open the door for any future majority party to use the same tactic.
