You Can’t Pay for Tax Cuts By Collecting Fewer Taxes

Jacob Bogage of the Washington Post takes a look at ten policies that congressional Republicans can pursue that will help them pay for an extension of the 2017 Trump tax cuts. To be more accurate, Bogage actually only provides nine ideas, because the tenth policy would slash the budget for the Internal Revenue Service and be counterproductive.

In fact, the Republicans have already cut $20 billion from the Biden administration’s infusion of IRS cash, and last year the Congressional Budget Office (CBO) estimated that the change would increase the budget deficit by $65.8 billion. Further cuts would result in even less tax collection and bigger deficits.

There’s something very Republican about “paying” for tax cuts by reducing the IRS’s ability to catch tax cheats and thereby increasing the deficit on both scores.

But, let’s say that Republicans didn’t cut IRS funding. Let’s say they restored that 20 million they already cut and gained back the $65.8 billion they already lost. What would happen then?

Well, item eight on Bogage’s list is dropping a rule proposed by the Biden administration in November that would “require Medicare and Medicaid to cover the cost of anti-obesity medications, such as Ozempic, Wegovy, Mounjaro and Zepbound.” The Committee for a Responsible Federal Budget (CFRB) estimates this would save the government $40 billion over 10 years.

Item nine on Bogage’s list is a change in the rules of eligibility for the Child Tax Credit. If Congress required “both parents and children to have Social Security numbers…that would prevent many immigrant families from accessing the tax credit, reducing federal spending by $20 billion, according to the CRFB.”

Together, these two policy changes would save $60 billion, or $5.8 billion less than simply letting the IRS track down wealthy and corporate tax cheats.

Another way of putting it is that by adding money to the IRS budget, the Biden administration essentially paid for Medicare and Medicaid obesity treatment and a tax credit benefiting citizen children. They did this by collecting taxes that had previously gone uncollected, not by imposing tax increases.

All of this is small potatoes in the larger budget picture, but it’s important. Much bigger savings are proposed by gutting clean energy incentives ($700 billion), cancelling student loan forgiveness ($275 billion), closing the Department of Education ($200 billion), slashing food stamps ($180 billion), and creating a Medicaid work requirement ($109 billion).

On this last score, our latest podcast is an interview with Mark Stier, who is the executive director of the Pennsylvania Policy Center. We discuss the importance of Medicaid and Stier’s efforts to protect it against savage cuts from the Trump administration. Please give it a listen.