Senate Republicans Rig Congressional Rules to Make Their Tax Cuts Appear Cost-Free

This week, members of Congress are arguing about whether extending Trump’s 2017 tax cuts would cost trillions of dollars over a decade or cost nothing. How could lawmakers have such divergent views on a basic factual question? If you ask D.C. insiders, they will start explaining the debate over the “budget baseline” and you will instinctively scan the room for someone who looks like they would be more fun to talk to. However, given that Congressional Republicans are attempting to make a $4.6 trillion cost disappear with this gimmick, some discussion is warranted.

What tax provisions are expiring?

In 2017, Congressional Republicans drafted and passed a tax law, which was signed by President Trump, that made changes in the corporate income tax that are mostly permanent and made changes in the personal income tax and estate tax that are mostly temporary. Most of these temporary changes expire at the end of 2025.

There is no reason to believe that the law’s drafters wanted any of these provisions to expire. They made these provisions temporary so that the official cost over a decade, which Congress traditionally examines and debates, would appear far smaller. This limited the official projected cost of the law in 2017 to $1.5 trillion over a decade.

Now, Senate Republicans want to make these provisions permanent or at least extend them for as long as possible. The Joint Committee on Taxation projects that extending them would cost more than $4.6 trillion over the next decade not including interest on the resulting debt. But Republican leaders want to avoid taking responsibility for, or even publicly debating, that $4.6 trillion cost.

What is a sensible way to think about the cost of tax cuts?

The most sensible way to think about a tax proposal is to compare it to the tax code that already exists under current law. When lawmakers propose new tax legislation, would it raise revenue or reduce revenue compared to what would happen if Congress made no changes to tax law? This makes sense, yet Republicans in Congress now want to characterize their proposal to extend Trump’s tax changes as a continuation of “current policy” – which would cost nothing.

What’s the point of saying that extending Trump’s tax cuts cost nothing?

First, Republican leaders want to simply say publicly that extending Trump’s tax cuts have no cost and they want Americans to believe that. This might even sound reasonable to someone not following the ins and outs of Congress because the taxes people pay in 2026 would not change from what they pay in 2025 if these provisions are extended. Someone paying attention only to their own tax situation might not see what all the fuss is about.

To understand why this is so problematic, people need to understand the Republicans’ second goal. Republicans want to change the rules that govern when and how they can use a process to pass legislation with budget impacts more easily.

Generally, any U.S. Senator can block legislation (commonly called “filibustering”) unless 60 of the chamber’s 100 members agree to end debate and allow a vote. The “budget reconciliation” process allows Congress to pass bills that have a budgetary impact with a simple majority in the Senate. Republicans therefore want to use the reconciliation process to enact legislation extending the tax cuts, because they do not have 60 votes in the Senate to overcome a filibuster.

In order to enact a law through the reconciliation process, it must comply with several rules. One of them is that the legislation cannot increase the deficit outside the “budget window,” the 10-year period that lawmakers examine for fiscal questions.

This is one reason why the 2017 Trump tax law was drafted with so many temporary provisions, even though the drafters never really wanted them to expire. This prevented official budget estimators from projecting that it would increase the deficit outside the 10-year budget window and allowing it to be passed through reconciliation.

How can the Republicans bend the rules for reconciliation to make a $4.6 trillion cost disappear?

When Congress’ official budget estimators determine the fiscal impact of a bill before the House or Senate, they traditionally compare the bill to current law. Their estimates are used to determine whether legislation complies with the rules for reconciliation.

Congressional Republicans want the budget estimators to compare their upcoming reconciliation bill to current policy rather than current law, which would make extending the Trump tax provisions appear to have no cost and therefore no effect on the deficit that would violate the reconciliation rules.

Whether or not legislation complies with the rules to be enacted through reconciliation is a procedural question that is traditionally settled by the Senate parliamentarian, a person employed by the Senate to make these decisions.

For weeks there has been speculation as to whether the Senate parliamentarian would decide that the rules allow Republicans to use the current policy baseline. This week Senate Republicans announced that they would bypass the parliamentarian completely and allow the Republican chairman of the Senate budget committee, Lindsey Graham, to simply determine what baseline can be used.

This procedural gimmick is included in the budget resolution before the Senate this week. If approved by the Senate and the House, this will allow Republicans to pass reconciliation later this year that would extend the Trump tax cuts while pretending they have no cost.

What would be the long-term consequence of using the current policy baseline instead of current law?

The rules governing whether a bill increases the deficit on a permanent basis (and therefore cannot be passed through reconciliation) would become meaningless.

For example, lawmakers might want to enact a proposal that would cost $100 billion if it is in effect for one year and well over $1 trillion if it is in effect for a decade. Under the approach advocated by Congressional Republicans, the obvious strategy would be to enact the proposal for one year at a cost of $100 billion and then enact subsequent legislation that makes the proposal permanent, which would cost nothing compared to the “current policy” in effect at that time. Officially there would be no permanent increase in the deficit.

If a majority of Senators want to pass a bill, why can’t they just pass a bill without going through all of this?

It all goes back to the filibuster. The filibuster has taken different forms, but it did not always exist. Senators created it by accident when members decided to clean up their procedural rules and one of the things they did away with was a motion to allow a simple majority to end debate and vote. Years later, some members figured out that the lack of any such motion could be used to block the body from doing anything.

Eventually, the filibuster was weakened a bit, and it was not used frequently until relatively recently. But it still exists in the form of the 60-vote threshold for passing legislation that we know today. It has always been possible for a simple majority of senators to abolish the filibuster, but the chamber’s individual members value the power it gives them too much.

But what’s the point of having a 60-vote threshold to pass bills in the Senate if a simple majority of Senators can change the rules to create exceptions when they want to characterize a bill as “reconciliation” legislation?

Apparently, most senators benefit somehow from claiming they are following procedural rules that restrain them. Perhaps they believe this makes them more appealing to voters or more able to work with their colleagues. But they also want to have exceptions to the rules to avoid any restrictions whenever possible.

The end result is a morass of procedural rules and arcane debates about baselines obscuring the fact that Congressional Republicans want to enact trillions of dollars of tax cuts benefiting the wealthy without paying for them.

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