When Republicans cut taxes in the past, they did so only temporarily, bowing to Washington’s arcane budget rules that limited how much they could add to the federal deficit. They gambled — mostly successfully — that the tax cuts would not actually end because Democrats would eventually vote to continue them.
With this year’s tax cut, though, many Republicans no longer want to take that risk.
In the Senate, Republicans approved a budget outline on Saturday that opens the door to locking in the Trump tax cuts indefinitely without Democratic support.
Actually doing so would require Republicans to upend Senate procedures that have long governed what lawmakers can accomplish along party lines. That would mark a dramatic change in the hidebound institution, and invite Democrats to take major new steps of their own when they next control the chamber.
Senate Republicans believe that the Trump tax cuts are worth it. The party first passed the cuts in 2017, lowering individual income rates for most people, expanding the standard deduction and slashing corporate taxes.
Because they used standard Washington accounting methods at the time, many of the tax cuts are set to expire at the end of this year. Lawmakers are now facing a fiscal cliff that would increase taxes on many Americans if another bill isn’t passed.
Republicans acknowledge their good fortune in controlling Congress and the White House as the tax cuts come to an end. They can keep them going without having to negotiate with Democrats, who have sought to roll back some of the cuts.
But some Republicans worry that they may not get so lucky again. Democrats could have more power in future tax fights.
“Whenever that happens, the Democrats have a bite at the apple to say, ‘Well, we’ll hold your $5 trillion tax cut hostage unless you give us this spending or this destructive tax policy,’ and then you have to compromise,” said Grover Norquist, the president of Americans for Tax Reform. “Ending that fiscal cliff every five or 10 years is a huge step forward.”
Of course, no law is necessarily permanent. Lawmakers could always vote to change tax policy again. But Congress only tends to act on thorny fiscal questions when it faces a deadline.
Here is an explanation of why tax cuts usually expire, and how Republicans hope to make the cuts stay in place.
Why are tax cuts usually temporary?
Most legislation in the Senate requires 60 votes to avoid a filibuster, a threshold that means even the party that controls the chamber cannot always pass the policies it wants. But there is an important carve out: Lawmakers only need a simple majority to pass fiscal policy through a special procedure called budget reconciliation.
Senate passage of a budget resolution on Saturday was an early stage of the reconciliation process, and Republicans in the House now have to weigh in on the Senate plan before the party can move ahead with months of negotiations over the actual legislation.
Reconciliation includes a number of restrictions on what lawmakers can pass through the process. One of its most important rules has long been that bills using the procedure cannot force the government to borrow more money in the long term. Lawmakers can pass policies through reconciliation that add to the deficit over a decade, but after that the cost of a spending increase or tax cut has to be covered by other savings — a tall order when reducing expected federal revenue by trillions of dollars.
This limitation has shaped tax policy for decades. When Republicans cut taxes during George W. Bush’s presidency, they scheduled the cuts to expire a few years later. By that point, President Barack Obama was in the White House, giving Democrats control over the fate of the Bush tax cuts.
But tax cuts tend to have an inertia of their own. Americans get used to owing less money to the federal government, and Democrats have been hesitant to repeal tax cuts entirely. Doing so essentially amounts to a tax increase, risking voter backlash.
Mr. Obama eventually signed an agreement making most of the Bush tax cuts permanent, a possibility because the legislation was bipartisan and passed through regular means, not reconciliation.
With the Trump tax cuts, Democrats had suggested that they would keep much of them in place when they expired. Heading into this year’s debate, Democratic leaders pledged to not raise taxes on Americans making less than $400,000 each year, while progressive Democrats pushed to raise taxes on corporations and the rich.
Republicans do not want to go through a bipartisan negotiation in the future. They also believe that making the cuts permanent could help businesses plan their investments and grow the economy, even though corporate planning has been thrown into disarray by President Trump’s tariffs.
“Senate Republicans are united with the president in viewing a temporary extension as unacceptable,” said Senator John Thune of South Dakota, the Republican majority leader. “Americans should not have to live in fear of a tax hike every few years.”
How could Republicans pull this off?
Senate Republicans plan to change accounting standards and show that extending the Trump tax cuts indefinitely does not, in fact, add to the deficit in the long term — and therefore is allowed in reconciliation.
The strategy hinges on how the cost of tax cuts is assessed. Typically, renewing an expiring tax cut is treated the same way as passing a new tax cut. By that metric, called a “current law baseline,” continuing the Trump tax cuts would cost roughly $3.8 trillion over the next decade.
In the Senate, Republicans passed a budget outline that embraces a different method: assuming that the current policies will continue even if they are temporary. This “current policy baseline” assumes that the Trump tax cuts are not a new cost to the budget.
That strategy amounts to an illusion, showing that the Trump tax cuts do not cost anything. But the real motivation for Senate Republicans, they say, is to work around reconciliation’s restrictions on deficits. Senate Republicans are preparing to invoke a clause in years-old budget legislation that allows Senator Lindsey Graham of South Carolina, the Republican head of the budget committee, to unilaterally decide what certain policies cost, instead of nonpartisan scorekeepers.
“This is a huge gimmick, and it’s actually way worse than just doing current policy baseline,” said Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, a nonpartisan group that supports lower deficits.
It is unclear what the Senate’s nonpartisan parliamentarian, who interprets reconciliation rules, will make of this gambit. But some Republicans appear to be preparing to disregard her views, a move that could erode some limitations on what lawmakers have typically passed with only a simple majority.
Keeping the Trump tax cuts in place would significantly darken the country’s fiscal outlook. The Congressional Budget Office, a nonpartisan scorekeeper, estimated that America’s debt in 2054 would be almost 20 percent larger than expected if the Trump tax cuts continued for the next 30 years. As a result, some House Republicans who worry about the deficit have been skeptical about using the tactic.
“Once you’re making up numbers, you can just say anything you want,” said Bobby Kogan, a budget analyst at the Center for American Progress, a liberal think tank. “Once you’re here, the whole thing is a farce. Budget enforcement has died.”