Key Senators Agree On A Road To Cutting Taxes This Year
Two key Senate Republicans reached an agreement on the framework of a major tax cut that reportedly will save taxpayers $1.5 trillion over 10 years.
Sep 19 2017
CORKER, TOOMEY STATEMENT ON TAX REFORM
WASHINGTON – U.S. Senators Bob Corker (R-Tenn.) and Pat Toomey (R-Pa.), members of the Senate Budget Committee, today announced a path forward on tax reform. The budget resolution would allow for a tax reduction, as scored on a static basis, over a 10- year period.
“I am strongly committed to pro-growth tax reform that will lead to more jobs and higher wages and was glad to work with Chairman Enzi and Senator Toomey at the request of Senate leadership to reach an agreement that will allow the committees of jurisdiction to begin their work to craft this important legislation,” said Corker. “While each member of the caucus will have to make their own decision, I believe our agreement gives the tax writing committees enough headroom to achieve real tax reform that eliminates loopholes and lowers tax rates for hardworking Americans. I will be watching closely as the tax reform legislation is drafted, and ultimately, my support will be contingent on a final package that generates significant economic growth and does not worsen but hopefully improves our fiscal situation.”
“I am confident the budget agreement I have reached with Chairman Enzi and Senator Corker will give the Finance Committee the headroom needed to write a pro-growth tax plan that reforms the code, causes the economy to surge, and ultimately results in reduced federal budget deficits,” said Toomey.
Senators Bob Corker (R-Tenn.) and Pat Toomey (R-Pa.), members of the Senate Budget Committee, released a statement saying they agreed on a path toward tax cuts.
Sen. Toomey has favored tax cuts but Sen. Corker had previously opposed any tax cuts that would add to the country's $20 trillion of debt. In backing off that stance, Sen. Corker opened the path for the Senate to pass a tax-reduction bill, but Senate passage would be only the first step in the legislative process.
To become law, the Senate bill would also need to be ratified by the House of Representatives, where its fate is far from certain. House Majority Leader Kevin McCarthy (R-Cal) and Speaker of the House Paul Ryan (R-Wis.) have previously said they would only approve of revenue-neutral tax cuts that don't add to the nation's debt, casting doubts on the political success of tax cuts that add to the budget deficit.
If both the House of the Congress agrees to cut taxes by $1.5 trillion and President Trump, who favors tax cuts, signs it into law, lawmakers would be putting off a day of reckoning with growing interest payments on the U.S. debt.
This chart from the Congressional Budget Office, a non-partisan arm of Congress, projects spending by the U.S through 2046 on major entitlements and defense. Based on current trends, major spending by the U.S. for Social Security, Medicare, Medicaid, defense, and interest on the national debt are fairly stable and rise gently through the mid-2020s and beyond. However, in the mid-2020s, interest owed on these government programs accelerates quickly. If $1.5 trillion were added to the national debt to pay for tax cuts this year, it would further exacerbate the rise of interest owed on the debt.
Not addressing the long-term deficit for another decade, according to the CBO projections, would put the nation on a perilous course. Such a crisis, as it comes nearer, may be necessary for lawmakers to solve the problem.
CBO's 10-year and extended baselines generally reflect current law and are meant to serve as benchmarks for measuring the budgetary effects of proposed changes in federal revenues or spending. They are not meant to be predictions of future budgetary outcomes; rather, they represent CBO's best assessment of how the economy and other factors would affect revenues and spending if current law generally remained unchanged. 10-year Treasury bond yield assumptions: 2.7%, 3.6% 4.1% in 10-year increments through 2047.
If tax cuts are enacted this year, opportunities to cut your tax bill could save you a lot of money, but determining exactly how you might benefit will require reviewing your income, deductions, capital gains and losses when the final tax bill is passed.
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This article was written by a professional financial journalist for PGWM, Llc., and is not intended as legal or investment advice.
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