House Speaker Paul Ryan, R-Wis., last week made a strong commitment to permanent tax reform, splitting sharply with key Republicans who would settle for a temporary bill in order to abandon revenue neutrality.
Republicans have almost universally acknowledged that that they’ll need to use the reconciliation process to overcome 60-vote procedural hurdles in the Senate and pass tax reform. There is less agreement over how to fit the bill within the requirements of reconciliation. A reconciliation tax bill generally cannot lose revenue outside the 10-year budget window.
Keeping tax reform revenue neutral is proving to be a huge challenge, and administration officials are pushing congressional lawmakers to just enact a net tax cut that would expire within the budget window. The Joint Committee on Taxation has warned that a corporate rate cut must expire eight years before the budget window ends to comply, so the administration is proposing to extend the budget window for a longer tax cut.
Congressional Republicans were initially resistant to the idea of bending the current scoring rules, but key members have recently warmed up to the strategy. Senate Finance Committee Chair Orrin Hatch, R-Utah, recently said he would like to extend the budget window, while Freedom Caucus Chair Mark Meadows, R-N.C., said it should be an option.
Ryan’s comments in response were dismissive and unequivocal.
“These reforms — these tax cuts — they need to be permanent,” Ryan said. “Every expert agrees that temporary reforms will only have a negligible impact on wages and economic growth.”
Ryan’s stance blunts some of the momentum that had been building for temporary tax cuts, and splits his party for now. The revenue question is one of the most important remaining issues that need to be resolved if tax reform is successful.
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