CBO Gives Republicans a Chance for Real Tax Reform
The Congressional Budget Office this week raised its cost estimate for Democrats’ energy subsidies “substantially higher,” to roughly $1 trillion in the coming decade. The news gives Republicans an opening to jump-start the tax-reform debate before major provisions of the Tax Cuts and Jobs Act expire in December 2025.
In addition to the green pork, the CBO estimated the cost of the latest student-loan-forgiveness plan at $260.7 billion over a decade, while an unlawful regulatory expansion of ObamaCare subsidies will cost at least $45 billion. Independent experts peg another major Biden regulation, this one increasing food stamp benefits, as costing $180 billion to $193 billion over 10 years.
Legislation repealing these three regulations and green subsidies from 2022 would fund roughly half the cost of extending the expiring tax cuts. While pro-growth conservatives might object to “paying” for revenue reductions, doing so would yield distinct advantages. Senate procedure prohibits legislation that increases long-term deficits from passing via a simple 51-vote majority—the reason the individual rate cuts were written to expire next year. To the extent that Republicans can find reasonable “pay-fors” to make some or all of the extensions permanent, doing so would provide helpful policy certainty.
Replacing targeted green subsidies with permanent across-the-board rate reductions would also generate economic benefits, more efficiently allocating capital while eliminating a source of cronyism. It would protect Republicans from getting tagged with voting for tax increases when repealing Mr. Biden’s climate handouts.
Republicans have thus far failed to articulate their strategy for tackling the tax cliff, instead dithering for weeks over temporary tax giveaways. Mr. Biden will soon step in with a budget proposal that doubtless will rely on taxing “the rich” to close fiscal gaps.
The Republican strategy on taxes is—what exactly? Some lawmakers may think that persistent inflation and a border crisis guarantee a Republican sweep in November. But with the deadline for tax increases looming, and Biden advisers already signaling they plan to campaign on class-warfare themes, the right needs to plan how it will avoid tax increases.
Legislation combining a repeal of green pork, elimination of costly Biden regulations, and an extension of tax relief would codify several conservative policy wins: a flatter, fairer tax code; lower federal spending; and reduced power for the administrative state. House Ways and Means Committee Chairman Jason Smith (R., Mo.) should focus on this instead of coupling temporary corporate handouts with an expansion of the welfare state and calling it tax “reform.”
This post was originally published at The Wall Street Journal.