This One Word Is Worth $500 Billion as Congress Debates Tax Cuts

by Jonathan Allen

WASHINGTON — Policy.

That word could be worth $500 billion to congressional Republicans as they try to play down the effect of President Donald Trump's tax cut proposal on the nation's debt.

They're eyeing a switch in the standard Congress uses to measure the cost of tax cuts — from the "current law" baseline to a "current policy" baseline. The switch would mean that the tax cuts would appear to have far less impact on the long-term debt.

Here's how it's worked in the past: Congressional budget experts measure the deficit impact of new legislation against current law. If, for example, a tax break on rum is set to expire in two years, the experts assume that the government will collect more revenue in the third, fourth and fifth years because the tax rate on rum will have gone back up after the break has expired.

But the "current policy" baseline assumes that every law now in effect would continue in perpetuity, even if the law has a sunset date. Republicans like the "current policy" baseline because it means that projections of future government revenue are lower — and, as a result, tax cuts look smaller compared to current policy than they do compared to current law. 

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Source: NBC News