Hoping to avoid the fate of the George W. Bush-era tax cuts, which were forced to expire under budget rules, Senate Republicans are weighing a new approach that would give them more wiggle room to pass a major tax code overhaul without having to show a quick return.
By extending the budget window beyond the traditional 10 years, Republicans can give their tax-rate cuts more time to boost the economy and, they hope, produce enough revenue to offset an initial drop.
Sen. Pat Toomey, a member of the tax-writing Senate Finance Committee who is behind the idea, said tax plans could be evaluated over the course of decades to determine their full effect on the economy and the federal budget.
“Many business choices hinge on forecasting beyond that period and whether a 20- or 30-year budget window is considered, a longer time frame, in combination with proposed reforms, will help us realize a robust economic revival,” the Pennsylvania Republican said in a statement to The Washington Times.
Sen. Pat Roberts, another Finance Committee member, said Mr. Toomey’s suggestion is “under serious consideration.”
“I think the more that we can get something done on a longer [basis], that’s what we’ve got to do,” said Mr. Roberts, Kansas Republican. “I mean, people want stability. They want predictability.”
Republican leaders have said they want to pass a “revenue neutral” tax package using a process called budget reconciliation. That tool allows bills to pass with a simple majority in the Senate, rather than face a possible 60-vote filibuster threshold.
But bills that pass through reconciliation can’t add to the federal deficit beyond what’s typically a 10-year window. For example, the Bush-era tax cuts were initially given a 10-year expiration date because they were passed under reconciliation.
Mr. Toomey’s plan would be a way around that.
Senate Budget Committee Chairman Mike Enzi was tight-lipped about the notion of extending the traditional time frame, saying he’s not in the habit of rating other senators’ ideas.
“I don’t get into any of the strategies until I get ‘em down on paper and put ‘em out,” Mr. Enzi, Wyoming Republican and a Finance Committee member, told The Times.
Still, Republicans have long said that budget scorekeepers underestimate the macroeconomic effects of tax cuts, and a longer window could provide more time for the effects to kick in and presumably boost the revenue side of the equation after the immediate hit.
One proposal that could benefit from a longer window is a Republican idea to allow companies to immediately write off their business expenses, rather than the current system that has them do it over a number of years, said Grover Norquist, president of Americans for Tax Reform.
“In terms of needing to make it deficit-neutral, moving it out 20 years is a lot easier to work with,” Mr. Norquist said.
He said expensing is “one of the very key, pro-growth parts” of tax reform, but that the way it’s evaluated by scorekeepers shows an early drop in revenue. Allowing a longer window would show that over time it pays for itself, he said.
Democrats, though, have long challenged the notion that tax cuts pay for themselves over time.
And Sen. Ron Wyden of Oregon, the ranking Democrat on the Finance Committee, said there are some legal questions about whether Republicans can extend the budget window.
“When I heard about it, I just said, ‘Boy, somebody’s got to take out all the statements leading Republicans have made about deficits and revenue neutrality, and now we’re going to try to change the rules and pretend that deficits don’t matter for decades on end,’” said Mr. Wyden.
David Burton, a senior fellow in economic policy at the Heritage Foundation, said he doesn’t seen any legal problems with extending the window. He said the relevant law only says the window must be “at least five years.”
“There’s no reason why they couldn’t use 20,” Mr. Burton said. “Budget committees have always used the 10-year window, but they can make it 20 years just by doing it. All they have to do is do it — call out in the budget resolution 20 years’ worth of revenue and expenditure targets.”