WASHINGTON – A crucial Republican senator said he could accept a blueprint for tax policy that would let the GOP cut taxes by about $250 billion over the next decade, and possibly hundreds of billions more, staking out a position that could help shape the party's planned tax overhaul.
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Sen. Bob Corker (R., Tenn.), a pivotal vote on the Senate Budget Committee, is framing the debate by defining his position on tax breaks that have already lapsed or are scheduled to expire in coming years.
On Thursday, he said he was prepared to back a budget that assumed tax breaks for capital investment would be extended by Congress apart from any tax-law rewrite. That decision could let lawmakers extend that break or cut taxes elsewhere without offsetting the cost with tax increases. The impact: At least $248 billion over a decade.
The GOP has a one-vote margin on the Budget Committee. To proceed toward a tax overhaul, it must get eager tax-cutters such as Pat Toomey (R., Pa.) on the same page with self-described fiscal hawks like Mr. Corker. The tax-cutters prioritize lower rates, while the hawks are wary of steps that might increase the deficit. The groups will also need to come to terms on the Senate floor, getting at least 50 of 52 Republicans to back the same budget.
Budget Committee Republicans say they are making progress toward a fiscal 2018 budget, which will set the broad parameters for the subsequent tax bill. Passing a budget is the first step in a process known as reconciliation that allows Republicans to pass a tax bill on a simple majority vote without Democratic support.
Under reconciliation, a tax bill can't increase deficits beyond a 10-year budget window, but there can be tax cuts in the first decade. Republicans are debating how to define the baseline, or yardstick, against which tax cuts are measured.
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"It's a work in progress," said Sen. John Boozman (R., Ark.). "Everybody wants to get it worked out and get there."
A committee vote is possible this month, said chairman Mike Enzi (R., Wyo.).
Under typical budget rules, tax cuts are measured against current tax laws. When tax breaks are scheduled to expire or have already lapsed, congressional scorekeepers assume they will do so. Extending them would need to be accounted for in a new law.
Many Republicans want to assume those tax breaks would be extended indefinitely, so that a tax bill could either keep them without recording a fiscal cost or replace them with other tax breaks. Democrats and budget hawks call that a gimmick, noting that Congress specifically decided in 2015 to set expiration dates for many tax breaks.
The House budget assumes that the lapsing tax breaks would expire and banks on the revenue they would yield. Partly as a result, House Republicans can claim that their budget balances by 2027. Rep. Kevin Brady (R., Texas), chairman of the House Ways and Means Committee, praised the House budget on Thursday but also said that the opposite assumption, the one that allows for deeper tax cuts, would be more accurate.
Mr. Corker said Thursday that he was willing to assume Congress would extend fast write-offs for capital investment because he thinks Congress would likely extend it, anyway.
Bonus depreciation, which has been in place for about a decade to encourage companies to make capital investments, is scheduled to become less generous and then phase out after 2019.
Mr. Corker's statements would seem to set the outer bounds for a GOP tax bill, which is still being written. Mr. Corker said he wasn't as sure about the remainder of the expiring tax provisions, which are worth $214 billion.
"Are there some that likely would not have been extended? There may be," Mr. Corker said.
Some breaks, including targeted incentives for motor-sports tracks and private mortgage insurance, lapsed at the end of 2016. Others are set to end after 2019 and 2021.
Sen. Ron Johnson (R., Wis.), also on the Budget Committee, said he wants to assume the breaks expire. Sen. Mike Crapo (R., Idaho) said he was undecided.
Beyond the debate about lapsing tax breaks, Mr. Corker said he was willing to include some assumption for dynamic scoring, or the idea that tax cuts partly pay for themselves because they generate faster economic growth. How much depends on the tax bill and Mr. Corker said he wanted more details from the tax negotiators.
"There's an open discussion that's taking place as to what is the appropriate amount of dynamic scoring," Mr. Corker said. "It would be helpful to us if [tax-bill writers] would sit down and tell us the kind of numbers they're looking at."
Assuming half of the high-end $700 billion dynamic-scoring estimate from a 2014 tax plan would yield $350 billion that could get plugged into the GOP budget.
In all, the combination of ideas under consideration could give Republicans the ability to cut taxes by more than $700 billion over the next decade without offsets.
Write to Richard Rubin at firstname.lastname@example.org
(END) Dow Jones Newswires
September 08, 2017 15:13 ET (19:13 GMT)