Corker’s Proposed “Trigger” to Offset Increased Deficits if Tax Revenue Doesn’t Pan Out is Roundly Criticized by Experts on Both Sides
Earlier this week, Sen. Bob Corker negotiated an, as yet, unspecified “trigger” mechanism that is supposed to result in automatic tax increases some years down the road if the tax legislation working its way through Congress fails to actually raise future revenues needed to limit the increase in the national debt to $1.4 trillion. This was the amount of debt increase Sen. Corker negotiated earlier this fall with Senate Republican leaders, as a condition of his considering supporting a final package.
A new analysis of the flawed nature of the trigger mechanism has been prepared by the Center on Budget and Policy Priorities (CBPP). We also encourage you to read this op-ed by former Treasury Secretary Robert Rubin, and this column by a business reporter at The Washington Post, Sen. Bob Corker promised not to let the GOP tax bill drive up the debt. He’s running out of time.
Several times Sen. Corker has made very principled statements against tax legislation adding to the deficit.
“With realistic growth projections, it [tax reform] cannot produce a deficit. There is no way in hell I’m voting for it.” Bloomberg, 9/29/17
“At the end of the day, if I think [tax reform] adds one penny to the deficit, I’m not going to vote for it…I’m going to lay on the railroad tracks and keep it from happening.” The Washington Post, 9/29/17
“Unless it reduces deficits and does not add to deficits with reasonable and responsible growth models, and unless we can make it permanent, I don’t have an interest in it.” Tennessean, 10/24/17
It’s time for Sen. Corker to take a stand on his principles. His support for this trigger is clearly inconsistent with those previous statements—so is his support for a $1.4 trillion increase in the deficit from tax legislation. We urge you to tell Sen. Corker to abandon the fig leaf of the “trigger” and stand strong for his principles.
The following are highlights of the critiques made against the trigger in the CBPP fact sheet and the Rubin op-ed. Below that are statements that have been made on the conservative side of the ledger opposed to the trigger.
- The trigger will very likely never be used. News accounts suggest that the trigger would be implemented in 2022, five years after the tax cuts kick in.
- An automatic trigger for tax increases is unprecedented. And it is highly unlikely that a future president and Congress would raise taxes when faced with expiring tax cuts, especially on wealthy corporate interests.
- There is a long history of lawmakers enacting legislation to override triggers, including automatic spending cuts. Among them: In 2010 Congress extended all the expiring Bush tax cuts for two years. In 2013 they were extended permanently, except for the richest 1%.
- The trigger can only be used one time, so if Congress decides to override it the first time, it never faces the trigger being pulled again.
- The trigger, if ever used, will only raise one-quarter of the revenue lost from the tax cuts, which largely benefit the richest 1% and corporations.
- News reports indicate that if the trigger is pulled it could require $350 billion in tax increases on corporations. Even if that occurs, that is still only one-quarter of the $1.4 trillion in revenue lost from the tax bill in the first decade.
- Outside experts predict the tax bill will lose $2 trillion in the first 10 years because the tax cuts for individuals that are slated to expire in 2025 will likely be renewed by a future Congress.
- The trigger is a fig leaf. It lets lawmakers claim that they are being fiscally responsible but sidestep the hard choices needed to make that be true. It gives politicians who claim to be concerned about the deficit cover to support deficit-increasing tax cuts.
- Triggering tax cuts in a recession or when the economy is lagging would be counterproductive.
An economic slowdown is when we should prime the pump, not put the brakes on with a tax increase. That is when we need businesses to spend more to help pull the economy out of a tailspin.
Key Republicans who are against a “trigger” include:
“While one can appreciate the intentions, the fact remains a fiscal trigger is a terrible idea. The flaws of the fiscal trigger, whereby taxes would rise if revenues disappointed are many, but let us focus on the biggest. The most obvious is, against what metric would a shortfall be counted? Are the trigger’s proponents willing to embrace a particular estimate for the additional growth and associated revenue gains? Without such a dynamic revenue estimate, the trigger is an illusion.” —J.D. Foster, Senior Vice President, Economic Policy Division, and Chief Economist, U.S. Chamber of Commerce
“The idea of a ‘tax hike trigger’ should be rejected on its merits…Any senator who understands basic business principles and truly cares about the deficit should understand that this trigger is an automatic tax increase and will actually harm economic growth. It will have harmful impacts on American businesses and undermine any economic growth potential in this tax reform bill because businesses will not invest due to the possibility of a higher tax rate.” —Club for Growth President David McIntosh
“The key to pro-growth tax reform is permanence and certainty. This encourages job-creating investment. No one invests in response to ‘maybe.’ A trigger that threatens tax hikes is a self-fulfilling threat to kill jobs.” —Americans for Tax Reform president Grover Norquist
“It’s disappointing to see some in the Senate considering a provision that would automatically raise taxes as part of the Tax Cuts and Jobs Act. Including a trigger mechanism in tax reform is antithetical to the principles of the unified tax framework. Such a provision would add unnecessary complexity and uncertainty into the tax code, stifle the economy and generate less revenue. Simplifying the tax code and keeping rates low, flat and fair is the best way to spur economic growth. Champions of pro-growth, comprehensive tax reform should oppose any attempt to include this harmful provision for the sake of the hardworking Americans depending on Congress to enact reforms that will deliver real tax relief and economic prosperity.” —Americans for Prosperity Chief Government Affairs Officer Brent Gardner
“I’m not very excited about having any automatic raises in taxes.” —Sen. Rand Paul
Tax hike trigger could “have a self-fulfilling effect.” —Sen. Pat Toomey
“It’s hard to imagine a more counterproductive policy than imposing automatic tax hikes on an economy that isn’t growing as fast as expected. Furthermore, the very threat of looming tax hikes could be a drag on growth all by itself. If revenue is a concern, there is plenty of corporate welfare and wasteful spending left to cut. History has shown that tax cuts consistently lead to increases in federal revenue as a result of robust economic growth. We’re hopeful Congress won’t undermine the many positive reforms in the Senate bill with this self-destructive policy.” —Freedom Partners (Koch Brothers) Executive Vice President Nathan Nascimento
The Washington Post, column by Robert Samuelson, Kill the Tax Bill, Nov. 29, 2017
The Washington Post, op-ed by Alan Simpson and Erskine Bowles, A moment of truth for our country’s financial future, Nov. 29, 2017