How Republicans can pass a tax bill

OPINION:

The House of Representatives has just passed a budget bill that extends the 2017 Trump tax cuts, contains new Trump-proposed tax cuts and offsetting spending cuts, and reduces the deficit. This is a monumental accomplishment of House Speaker Mike Johnson.

The House must now reconcile its bill with the Senate. Among the many additional questions to be addressed is the seemingly esoteric question of how a new combined bill will be “scored.” This question has divided Democrats and Republicans and congressional Republicans from one another.

The Congressional Budget Office and the Joint Tax Committee will calculate how a new bill will add to or subtract from the federal deficit. Here is where the issue arises. If a simple extension of the current law is scored as a brand-new tax cut, roughly $4.5 trillion will be added to the deficit simply by extending the current law. There is no realistic way this amount can be offset by spending cuts elsewhere to produce a revenue-neutral bill, much less a bill that decreases the deficit.

Here, very conservative Republicans and congressional Democrats are ironically on the same page, though for very different reasons. Democrats oppose an extension of the 2017 bill altogether. They regard the 2017 legislation as a boon to wealthy taxpayers that should be terminated, at least in large measure. They argue that an extension of current law should count as a major new tax cut, and scoring it as such would demonstrate Republican fiscal irresponsibility.

Conservative congressional Republicans, on the other hand, have an entirely different motivation. A new tax bill will likely contain new tax cuts, such as eliminating taxes on tips, other Trump campaign promises, and new spending for immigration control and defense. These provisions will add to the deficit but will be more than offset by spending reductions in other areas. Conservative Republicans argue that if extending current taxes are counted as deficit increases, Republicans will have to cut far more deeply to achieve a revenue-neutral bill. Counting a simple tax extension as a new tax cut, they argue, will put pressure on members to find massive new spending cuts elsewhere. This is a noble goal but impossible to achieve.

What is to be done? The best approach for Republicans is to treat the extension of the current law as having zero impact on the deficit. This is known as setting “current policy,” not current law, as the baseline. Extending the current level of taxation should not “cost” the government anything and should not count as adding to the deficit.

Of course, new spending should be more than offset by new cuts elsewhere and as deeply as possible. This would produce a bill that genuinely reduces the deficit.

The CBO may count an extension of current tax law as new taxation. It has frequently done so before. Republicans, however, need not follow the CBO, whose “scores” are not law but estimates. Republicans are free to follow or to disregard these estimates. After all, current taxes in the 2017 law have already been scored once as contributing to the deficit, and there is no reason to do so again. CBO scores are, in any event, guesses about the future. Their projections have often been wrong and sometimes spectacularly wrong. Although having a favorable CBO ruling would be nice, passing a genuine tax cut that reduces the deficit is far more important.

• Jeff Bergner has served in the legislative and executive branches of the federal government.