A $715 billion tax cut turns into a $4.5 trillion sales job

Politico

a day ago

Early polling shows the package is not popular, though most taxpayers won't begin to benefit from the tax cuts until they file their returns next spring. Many are in line for extra-large refunds because Republicans made a number of provisions, including an enlarged Child Tax Credit and a more generous deduction for state and local taxes, retroactively available for the current tax year.
During congressional consideration, Senate Republicans were adamant that the correct way to tally the cost of their plan was by comparing the changes to what the government was currently doing, not what was carved into law, as budget scorekeepers normally do.
So, by that light, extending current tax policies into next year should cost nothing, and not even be seen as a reduction in taxes. The only tax cuts that counted, Republicans said, were new provisions like Trump's proposals to reduce levies on tips, overtime, auto-loans and seniors, along with enhancements of existing breaks, like a $200-per-child increase in the Child Tax Credit.
The tactic drastically reduced the sticker price of the plan, no small deal given concern over federal red ink.
And it made it much easier for lawmakers to make many of their provisions a permanent part of the tax code. Otherwise, under the Senate's internal rules, they would have had to find a lot more pay-fors to cover the cost of making permanent breaks for business investment, research and interest expenses.
But that current policy baseline now not only makes their tax cuts look less consequential, it also shrinks the anticipated benefits to their constituents.
Under the conventional baseline that Republicans spurned, people making between $60,000 and $80,000 would see their taxes fall by an average 12 percent in 2027, the official Joint Committee on Taxation said in an analysis last week. But those people would only get a 4.2 percent cut under a current policy baseline.
Nevertheless, days after Trump signed the bill into law, Senate Republicans bragged on X that they had just cut taxes by $4.3 trillion.
And lawmakers are now routinely claiming to have passed the largest-ever tax cut, though with a $715 billion price tag, the legislation is not significantly bigger than tax cuts passed during the coronavirus outbreak.
The more conventional $4.5 billion estimate moves the legislation up the all-time-biggest-tax-cut list, though there were still larger ones, such as Ronald Reagan's 1981 tax cuts and when Harry Truman cut wartime taxes in 1945.