House Republicans passed legislation last week that most contend would increase taxes, but one influential GOPer said this week that it won’t.
What Went Down:
- The Republican-majority House passed legislation last week that, if enacted, would address the debt ceiling and pare-back or repeal certain tax incentives enacted in the Inflation Reduction Act. A tax expert this week said that the bill’s tax provisions should not be considered a tax increase.
- The House is on recess this week.
- The Senate is in session and the Finance Committee held a non-tax related hearing.
Let’s get to it:
House Republicans, who have historically opposed tax increases, voted for legislation that increases taxes – but one GOP highflyer said that these increases should not be considered tax increases.
Here’s the story:
House Republicans approved debt-ceiling legislation on April 26th that repeals or shrinks several energy tax credits contained in the Inflation Reduction Act.
In a normal world, this piece of legislation would be considered to increase taxes. It reduces or eliminates tax deductions or credits, which would up a taxpayer’s tax bill. Ergo, a tax increase.
But this is Washington, and facts are optional – especially when they don’t support your position.
Here are the facts:
- The Joint Committee on Taxation (JCT) projected that one section of the bill – titled “Repeal Market Distorting Green Tax Credits” (Yes, repealing tax provisions is in the title!) – would increase revenue by over $515 billion over the next ten years.
- The Congressional Budget Office (CBO) (which relies on JCT estimates) projected that the bill would “decrease outlays by $17 billion and increase revenues by $553 billion over the 2023–2033 period.”
Revenue increases primarily come from upping taxes. The decrease in outlays stem from the federal government no longer paying the bill’s refundable tax credits.
The JCT and CBO are the gold standard for bean counters in D.C. Their conclusions can make a big impact on the fate of legislation.
A well respected think tank also contends that the bill increases taxes.
A new Tax Policy Center analysis finds that repealing those tax breaks would reduce after-tax incomes in 2024 by an average of 0.2 percent ($810) for those in the top 20 percent of earners (who make at least $195,000 a year), while low- and middle-income households would face smaller increases… The top 0.1 percent of taxpayers (with incomes greater than $4.3 million) would face the biggest increase in tax burden: Their after-tax incomes would fall by an average of $31,700 in 2024.
Translation: “reduce after-tax income” = a tax increase.
These facts didn’t support the position of Grover Norquist, who doesn't think the bill increases taxes.
Norquist is the president and founder of Americans for Tax Reform and author of the "Taxpayer Protection Pledge,” which essentially states that signers of the pledge promise to not support legislation that increases taxes. Several Republicans have signed this pledge, and it has made Norquist very influential within their party.
Norquist told Roll Call, a Capitol Hill newspaper, that the legislation does not raise taxes. Here’s his explanation:
In an interview, Norquist explained why his group determined the debt limit legislation would not raise taxes — even though official scorekeepers said it would… Norquist relied largely on an informal analysis of the bill by GOP leaders who said they believed it would reduce taxes.
The article did not detail what the “informal analysis” found.
Given the preponderance of analyses that showed the bill would increase taxes, House Republicans needed someone with intellectual heft to contend that the bill does not up taxes. If not, the bill's passage in the House would be an open question.
No House Democrat supported the debt ceiling bill. If GOPers would have been told that the bill increases taxes, few would have likely supported it.
Of the 221 House Republicans, 217 voted for the debt ceiling bill. Nearly 190 of them (189 to be exact) signed Norquist’s ‘no tax increase’ pledge, according to Roll Call. Support from the 189 Republicans was instrumental to passing the bill, and GOP leaders needed an expert to quell fears of tax increases.
Norquist brought his A game.
[H]e said, ‘we were comfortable in saying, OK, then it is not a violation of the pledge, and it is fair for you or anybody to tell somebody that ATR’s sense of this is it is not a net tax increase.’
His point: The cost for any tax increase in the bill is outweighed by its spending cuts. In short: The legislation does not increase taxes – on net.
Others didn’t see it that way.
In analyzing the resulting legislation, the Joint Committee on Taxation estimated that repealing the credits would, even after factoring in other provisions that would reduce revenue, still cause the overall bill to increase revenue by $317 billion over 11 years.
CBO’s projection of budget deficits would be reduced by about $4.8 trillion over the 2023–2033 period... Reductions in discretionary outlays would amount to $3.2 trillion. Mandatory spending would, on net, decrease by $0.7 trillion, and revenues would, on net, increase by $0.4 trillion.
The increase in revenue would chiefly come from tax increases.
Also, linking tax increases to spending cuts is so Washington. Tax increases aren't canceled out by spending cuts in the real world.
Legislative Outlook: This bill is not expected to pass the Senate or become law.
Odds and Ends:
The House is on recess this week, but the House Ways and Means Committee announced this week that it will hold a field hearing about trade issues on May 9th.
The Senate is in session.
The Senate Finance Committee held a hearing on May 3rd on ghost networks, which are provider directories operated by insurance companies that can provide inaccurate or unusable information for those seeking mental health care. This hearing did not focus on taxes.
Legislative Outlook: It is currently unclear if tax legislation will stem from these events.
Pardon if this recap missed a monumental moment, but we can recap it next time!