Congress need not fear any deficit problems with Donald Trump's tax cuts and that's the subject of the riff. As we all know, Donald Trump intends to extend his successful 2017 tax cut bill, and perhaps even add to it in Trump Tax Cuts 2.0. Here's an important wrinkle in that story.
Senator Mike Crapo, Republican of Idaho, is strongly suggesting that Congress doesn't need to fear any deficit implications from the Trump tax cuts because they constitute a current policy baseline that assumes expiring items will always be extended.
Mr. Crapo notes that George W. Bush and Barack Obama's tax policies used current policy estimates that were blessed by lawmakers. There was no fiscal cliff tax cut deal at the end of 2012 and Mr. Crapo believes that Congress shouldn't look at extending the expiring tax cut provisions as adding to the price tag, because an extension would simply continue the status quo.
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He believes only the incremental cost of new tax or spending ideas would count toward reconciliation targets. In an interview with rollcall.com, Crapo says, "If you look at history, extending current tax law has never been offset by Congress." He pointed to the New Year's Day 2013 extension of most of the expiring George W. Bush tax cuts of 2001 and 2003: "If it's literally not changing tax policy, I'm just telling you what the precedent that Congress has set is."
The Obama administration, by the way, accepted the current policy principle articulated by Mr. Crapo. Big hat-tip to my good friend Scott Bessent, who emailed me this story this morning.
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Now, this is not to take away from the Laffer curve and dynamic scoring, but, in this case, I am referring to the legislative process when it comes to extending current policy. The point of all this is to negate CBO or JCT estimates of $4 trillion or more in so-called lost revenues. Meanwhile, Kamala Harris is reportedly about to come out with her third new economic plan of her two-month candidacy. The Tax Foundation has priced out her $4 trillion in tax hikes as punishing the American economy with a nearly 800,000 job loss.
Mr. Trump's tax cut plan, however, has been estimated to increase American jobs by well over a million. Boosting jobs, real wages, and the overall economy is what the country wants. That's why Senator Crapo's reading of legislative history may turn out to be very important.
This article is adapted from Larry Kudlow’s opening commentary on the Sept. 23, 2024, edition of "Kudlow."
