Senate Tax Trigger Would Allow for $350 Billion Increase, Sources Say

Updated on
  • Provision for higher corporate levies is subject to change
  • Lawmakers seeking trigger to prevent increasing deficits
Sen. Thune Says Fiscal Trigger May Be Needed in Tax Bill

Senate Republicans are discussing adding provisions to their tax bill that could trigger up to $350 billion in automatic tax increases over 10 years beginning in 2022, according to two people briefed by congressional staff members on the plan.

A third person familiar with the emerging proposal confirmed the details. Republican senators including Bob Corker of Tennessee and James Lankford of Oklahoma have sought the trigger provision as a way to prevent the tax cuts in the Senate bill from increasing federal deficits.

James Lankford

Photographer: Andrew Harrer/Bloomberg

Representatives for Corker and Lankford didn’t respond to requests for comment. A staff member in Senate Majority Leader Mitch McConnell’s office declined to comment. Senate leaders hope to hold a floor vote on the bill on Thursday or Friday. Overall, the bill is estimated to reduce federal revenue by more than $1.4 trillion over 10 years before accounting for any economic growth it might produce.

Here’s how the people described the trigger plan, which may still be subject to change:

Tax increases would be triggered if federal revenue fell short of a specified threshold. That threshold consists of the revenue baseline that’s anticipated under current law over the next five years -- minus an amount that would have been lost under corporate expensing provisions that Congress has been allowing on a year-to-year basis. (The Senate bill would allow for full, immediate expensing of equipment purchases through 2022, at an estimated cost of $61.3 billion.)

Book Income

The size of a tax increase would correlate to the size of any shortfall. It would come in the form of an increase in the corporate tax rate and a new tax on the difference between corporate book income -- that is, the income reported to shareholders -- and actual taxable income.

The Senate parliamentarian will have to decide whether the revenue trigger provision meets the Senate Byrd Rule, which wouldn’t allow for any provisions in the legislation that don’t have direct fiscal effects.

If trigger fails the Byrd rule, then an alternative plan would call for the bill to simply contain a tax increase or increases beginning in 2022. A future Congress would have to repeal the increase.

On Wednesday, Senate staff members were working on the trigger proposal. A Senate floor vote to begin debate on the tax bill was expected later in the day.

A provision that raised $350 billion would mostly erase the $516 billion revenue loss that one independent group, the right-leaning Tax Foundation, estimated would result from an earlier version of the bill, after accounting for its macroeconomic effects.

The Tax Foundation estimate would be even lower if the extension of temporary tax breaks Congress regularly approves is taken into account. Other policy groups have estimated higher revenue losses, however.

The official Joint Committee on Taxation macroeconomic score of the bill has not been released. JCT told Senate Democrats it is aiming to release that score late Wednesday.

— With assistance by Sahil Kapur

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