WASHINGTON –The tax legislation produced by congressional negotiators and scheduled to be voted on this week remains as fiscally irresponsible as the original House and Senate bills, according to The Concord Coalition. This latest bill is based on flawed economics, poor tax policy and a troubling legislative process that has allowed little time for careful analysis.
“This bill is a particularly distasteful example of legislative sausage-making,” said Concord Coalition Executive Director Robert L. Bixby. “Its disingenuous combination of gimmicks and debt will not deliver the promised economic benefits, and the rushed, secretive process that produced this plan, with its many special-interest provisions, is bound to produce unwelcome surprises.”
The federal debt is already quite high by historical standards and projected under current law to increase by $10 trillion over the next decade. Instead of helping to address this problem, the tax bill would make it worse by adding more than $1 trillion in new borrowing. Moreover, gimmicks in the bill, such as “sunsets” never intended to take effect, are hiding its true cost.
The decision to enact a large deficit-financed tax cut at this time is very troublesome from a fiscal standpoint because the revenue loss would come just as the health care and retirement costs of retiring baby boomers are putting increasing pressure on the federal budget. Many lawmakers supporting the tax cuts are also looking for ways to increase spending on defense, border security and disaster relief.
“This is not the time for a big tax cut,” Bixby said. “The economy does not currently need fiscal stimulus; unemployment is low, corporate profits are high and the Federal Reserve is raising interest rates. At best the legislation could have some small short-term impact on the economy but even that is open to question. In the longer term, it does little to improve growth.”
Bixby added: “Tax cuts don’t pay for themselves — even with generous assumptions about their possible impact on economic growth. Eventually there will need to be tax increases or spending cuts to pay for this legislation. The bill leaves unanswered how that would be done, who would pay and how that would affect the economy.”
There are a number of other problems with the legislation from a tax-policy perspective. Some provisions would disappear in later years, for example. This makes no sense, particularly if the provisions are as beneficial as their supporters claim.
The Concord Coalition has long called for tax reform that would substantially broaden the tax base by reducing or eliminating many “tax expenditures” — provisions that reduce taxes for certain individuals and businesses. The broader tax base would enable Congress to lower rates and — ideally — reduce deficits as well, while making the code more economically efficient.
But the current legislation does not provide enough base-broadening relative to the planned rate cuts. In fact, the legislation creates new complexity in the tax code.
Congressional leaders and supporters of the proposed law should also be ashamed of the hurried and haphazard legislative process that produced it. There were no hearings or time for debate on the final product, or even thoughtful consideration.
There was no serious attempt at bipartisanship, which is preferable with such far-reaching legislation. Consequently, the views of many Americans were never really considered by those who wrote the legislation.