How much does a tax cut cost? It depends what you compare it to.
Republicans in Congress trying to advance a giant bill that includes $4 trillion in tax cut extensions are considering a novel strategy that would make the extension appear to be free. The trick: budgeting with the assumption that current policies extend indefinitely into the future — even those with an expiration date, like the 2017 tax cuts set to end next year. It’s the difference between making the extension appear to cost $4 trillion or zero.
Using this “current policy baseline” wouldn’t change the bill’s real effect on deficits or debt. But it would make it easier to actually make the tax cuts lasting by sidestepping a rule governing budget reconciliation, the process Republicans are using to pass the bill.
Yes, this sounds technical! That’s why we’ve enlisted some of Washington’s top budget veterans to explain this maneuver using a metaphor. Across the ideological spectrum, nearly all of the more than 20 experts we heard from disliked changing the baseline. Here are some of their examples:
“If budget reconciliation is like taking the express lanes on a highway (there’s extra rules and tolls, limited stops, but it gets you to where you want to go faster), using a current policy baseline for taxes is like slapping a fake license plate on your car.”
Zach Moller
Director of the economic program at Third Way, which describes itself as a “center-left” research group; former Senate Budget Committee staffer
“It’s like taking an expensive week-long vacation and then assuming you can spend an extra $1,000 per day forever since you are no longer staying at the Plaza.”
Marc Goldwein
Senior vice president and senior policy director for the Committee for a Responsible Federal Budget, a nonpartisan group that tends to be hawkish on deficits; former government budget analyst
“Last year, despite being deeply in debt, I bought a $100,000 sports car. So next year, buying another $100,000 car is not irresponsible because I am merely spending the same amount of money as the year before. And if I purchase “only” a $70,000 car, then I should be congratulated for reducing my annual spending by $30,000.”
Jessica Riedl
Senior fellow at the Manhattan Institute, a conservative research group; chief economist for the former Republican senator Rob Portman of Ohio
“Your daughter is graduating from college. You have been paying for her education, so you are expecting to have a big improvement in your budget. However, after graduation, your daughter announces that there’s no need for her to go find a job, since covering her expenses is just a continuation of the ‘current policy.’”
Michael Peterson
Chairman and chief executive of the Peter G. Peterson Foundation, a nonpartisan research group that promotes deficit reduction
“It’s like getting an F on an assignment, but then the teacher applies a curve so the grade written on your paper might say you passed, but you still did poorly on the assignment.”
Erica York
Vice president of federal tax policy at Tax Foundation, a research center that generally favors lower taxes
“A current policy approach is like if you signed up for a Crunchyroll anime subscription that you knew you couldn’t afford, but now that it’s time to re-up the subscription, you pretend it’s free because you’ve already been paying it.”
Bobby Kogan
Senior director of federal budget policy at the Center for American Progress, a progressive research group; former adviser to the director of the Office of Management and Budget; former Senate Budget Committee staffer
“It’s like winning $50 at a poker table today and saying you’re ‘up’ without acknowledging that you lost $500 each of the previous 5 days.”
Doug Criscitello
Program integrity fellow at Arnold Ventures, a research and advocacy group; former executive director of the Golub Center for Finance and Policy at the Massachusetts Institute of Technology
“Your spouse decides that they’re willing to spend $900 for three months of an Equinox gym membership so they can get in shape. But when the three months ends, they tell you that continuing the gym membership is free since you’ve already been spending $300 a month.”
Brendan Duke
Senior director for federal budget policy at the Center on Budget and Policy Priorities, a progressive research center; former senior policy adviser at the National Economic Council under President Biden
“Current policy is like being born on third base and thinking you hit a triple.”
Jim Kessler
Executive vice president for policy and co-founder of Third Way; former legislative and policy director to Senator Chuck Schumer, Democrat of New York
Pretending $4 trillion in tax cuts will cost nothing may not be easy. Many Republican lawmakers who are concerned about the deficit are well aware that the bill will increase the deficit by a lot.
And the Senate parliamentarian, who advises legislators on the chamber’s rules, could rule that the current policy baseline isn’t allowed. Overruling or replacing the parliamentarian, while possible, is very rarely done. Doing so might make lawmakers less willing to follow Senate rules in the future.
But that doesn’t mean they won’t try. Influential Republican lawmakers, including Speaker Mike Johnson and Senator Mike Crapo, chairman of the Senate Finance Committee, have publicly endorsed the current policy baseline. Treasury Secretary Scott Bessent has said the Trump administration also favors the approach.
The choice is appealing not just for appearances. It also helps Republicans deal with an important procedural issue.
Republicans are trying to enact their tax and spending bill through a special process known as budget reconciliation — a way to get around a possible Senate filibuster and pass the bill with only Republican votes. That process comes with lots of its own rules. A big one is that the legislation can’t increase the deficit after the first 10 years. Using a current policy baseline could help a permanent tax cut — one with no expiration date — pass that test. With a current law baseline, Republicans would be stuck passing either another temporary tax cut or trying to find Democrats to vote for their bill, an unlikely prospect.
And that’s why they may be willing to overlook the judgments of most budget nerds and pretend they still live at the Plaza.
