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Ways and Means Tax Package Could Cost Over $900 Billion Now

Jul 18, 2019 | Taxes

Last month, the House Ways and Means Committee approved a tax package that would revive and extend several tax extenders through 2020 and dramatically expand certain tax credits. Only one of the four bills was offset, and we estimated the package would add $150 billion to the debt over ten years with interest or $710 billion over ten years if the temporary policies were permanently extended. During markup, an amendment added a temporary increase in the child tax credit for young children that added $30 billion to its cost. This change has pushed the cost for the permanent version of the package to about $910 billion over ten years including interest.

The bills would revive and extend through 2020 the tax extenders that expired in 2017 or 2018 or will expire this year; provider disaster tax relief; expand the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), and the Child and Dependent Care Tax Credit (CDCTC) temporarily; reverse the 2017 tax law's estate tax exemption increase three years earlier than scheduled; increase spending on Community Development Block Grants; and eliminate the "church parking tax" from the 2017 tax law.

Budgetary Effect of House Ways and Means Bills Approved on June 20

Policy Temporary Cost/Savings (-) Permanent Cost/Savings (-)
Revive and extend tax extenders through 2020 $33 billion $220 billion
Provide disaster tax relief $9 billion $9 billion
Reverse estate tax exemption increase after 2022 instead of 2025 -$38 billion -$38 billion
Subtotal, Extenders and Disaster Tax Bill $5 billion $190 billion
     
Expand EITC $30 billion $105 billion
Increase CTC for young children and make it fully refundable $80 billion $355 billion
Expand CDCTC $19 billion $105 billion
Repeal "church parking tax" $2 billion $2 billion
Subtotal, Credit Expansions $131 billion $570 billion
     
Increase Community Development Block Grant $2 billion $10 billion
     
Total $136 billion $770 billion
Interest ~$50 billion ~$140 billion
Total With Interest ~$190 billion $910 billion

Sources: Congressional Budget Office estimates, CRFB calculations.

Unfortunately, the one offset, to increase estate tax revenue three years sooner, only raises $38 billion over ten years, while the remainder of the bill costs more than four times that, mostly over the first two years. The Ways and Means package would add substantially to the debt, especially if its policies were made permanent. Lawmakers should at the very least find enough offsets to make the bill deficit neutral as written.

Reviving tax cuts that expired 18 months ago is bad fiscal policy, bad economic policy, and bad tax policy. A dozen groups from the left, right, and center recently joined together to call on Congress not to revive the "Zombie Extenders"  that expired over a year and a half ago. No matter the justification for the underlying policy, creating a new set of expiring provisions on top of these would simply double down on this policy failure with more uncertainty, temporary tax policy, and deficit-financed tax cuts.