Democrats are falsely framing budget reconciliation choice

Robert Robb

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The first-term tax bill substantially increased the standard deduction and reduced rates across all income brackets. Extending these provisions, or better yet making them permanent law, isn’t really a tax cut. It’s avoiding a tax increase that would hit middle-class and upper middle-class taxpayers with quite a whack.”

Democrats are framing the budget reconciliation issue as an attempt by Republicans to cut low-income programs to pay for tax cuts for the wealthy. That’s not an accurate description of the policy choice before Congress.

The Budget Act was supposed to create an orderly process for Congress to make macro decisions about how much the federal government was to raise and spend. Instead, it has become a source of political gamesmanship and disorder. Under the rules adopted to avoid the Senate filibuster under the act, limits are placed on the effect on deficits beyond the 10-year planning horizon. That results in provisions phasing in and out. Stability and predictability are fiscal virtues the Budget Act, as implemented, now undercut.

The corporate tax rate reduction from Trump’s first-term tax bill was made permanent. However, most of the individual tax provisions phase out after this year.

The first-term tax bill substantially increased the standard deduction and reduced rates across all income brackets. Extending these provisions, or better yet making them permanent law, isn’t really a tax cut. It’s avoiding a tax increase that would hit middle-class and upper middle-class taxpayers with quite a whack.

Nor does extending them actually increase the deficit. It is continuing the status quo. That’s bad enough, but it isn’t really making the fiscal situation worse.

The current-law approach of scoring these things, employed customarily by the Congressional Budget Office, treats this continuation of the status quo as an increase in the deficit, since current law would revive a smaller standard deduction and higher rates. More important than how the policy is scored, however, is its economic effects.

Economically, not extending the individual income tax provisions would be a big tax increase with predictable adverse effects on an economy already skittish from tariff whiplash.

Moreover, Democrats actually support continuing Trump's first-term tax provisions for all but the very wealthy. The reduction in the top bracket rate was modest, from 39.6% to 37%. Continuing all of the individual tax provisions is scored, according to the current-law method, at $2.75 billion over the 10-year planning period. Not including the top rate, allowing it to return to 39.6%, would cut that by only around 15%.

There are new tax provisions in the reconciliation bill that would increase the deficit even with a current-policy scoring. These include Trump’s pandering campaign pledges to reduce tax liability related to such things as tips, Social Security benefits, small business pass-through income, state and local taxes, and auto loan interest. Democrats have also expressed support for many of these measures.

In short, the things Democrats would support in a reconciliation bill would also, in a current-law accounting, be scored as substantially increasing the deficit.

The country badly needs a grown-up discussion about what we want the federal government to do and how to pay for it in a sustainable way. At this point, neither of our two major parties shows the slightest interest in participating in, much less initiating, such a discussion.

Editor's note: Retired Arizona journalist Robert Robb opines about politics and public policy on Substack. Reach him at robtrobb@gmail.com. Please send your comments to AzOpinions@iniusa.org. We are committed to publishing a wide variety of reader opinions, as long as they meet our Civility Guidelines.