Tax Extender Package Could Lead to $710 Billion of More Debt
Update 6/24/2019: During markup, the Ways & Means Committee added an amendment further increasing the child tax credit for young children, at an additional cost of roughly $15 billion per year ($). The legislation that passed the committee would now cost close to $200 billion over ten years with interest, or close to $900 billion if made permanent. The summary and numbers below reflect the bills before they were amended.
The House Ways and Means Committee will consider four bills today reviving or creating several temporary tax breaks that would add roughly $150 billion to the debt over the next ten years if enacted into law temporarily and $710 billion if made permanent.
The bills would revive the tax extenders that expired in 2017 or 2018 or will expire this year; enact temporary two-year expansions of the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), Child and Dependent Care Tax Credit (CDCTC), and exclusion for employer-provided child care; increase spending on Community Development Block Grants; offer tax relief for victims of disasters; eliminate the "church parking tax" from the 2017 tax law; and revert the estate tax to 2017 levels in 2022 instead of 2025 as scheduled under current law.
Unfortunately, the estate tax change only raises $38 billion over ten years, while the remainder of the bill costs almost four times that, mostly over the first two years. If policymakers extend the temporary deficit-financed tax cuts permanently, we estimate they would cost $710 billion with interest over the next decade, increasing projected debt in 2029 by 2 percent of Gross Domestic Product (GDP). Most of this cost would be on top of the other significant costs from extending current tax and spending policy.
Budgetary Effect of House Ways and Means Bills Considered on June 20
|Policy||Temporary Cost/Savings (-)||Permanent Cost/Savings (-)|
|Revive and extend previous tax extenders through 2020||$33 billion||$220 billion|
|Provide disaster tax relief||$9 billion||$9 billion|
|Expand EITC||$30 billion||$105 billion|
|Make CTC fully refundable||$51 billion||$180 billion|
|Expand CDCTC||$19 billion||$105 billion|
|Increase Community Development Block Grant||$2 billion||$10 billion|
|Repeal "church parking tax"||$2 billion||$2 billion|
|Reverse estate tax exemption increase after 2022 instead of 2025||-$38 billion||-$38 billion|
|Total||$109 billion||$600 billion|
|Interest Costs||-$40 billion||-$110 billion|
|Total With Interest||$150 billion||$710 billion|
Source: Joint Committee on Taxation, CRFB calculations. Numbers do not add to totals due to rounding.
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.
And without offsets, it would worsen an already unsustainable national debt outlook.