You may have heard about the Limit, Save, Grow Act of 2023 (LSG, HR 2811), which narrowly passed the House of Representatives last month. It is prominent in the ongoing debate over the federal debt ceiling. That’s the GOP’s wish list of spending cuts totaling $4.8 trillion over the 10-year budget window, according to the Congressional Budget Office.
Republicans say belt-tightening is necessary to control our federal spending, which has been exacerbated by the COVID-19 pandemic. Democrats counter that LSG will negatively impact social programs and harm vulnerable American families. They call the proposed work requirements too harsh for some Medicaid recipients. If John does not speed up his work, then John does not take insulin. Oh.
I was not surprised that House Republicans jumped at the opportunity to change some of the key provisions of last year’s Inflation Relief Act (IRA, PL 117-169), which was reconciled without a Republican vote. Predictably, one political party will attack the other’s legislative achievements the minute they get the chance.
For their part, lawmakers are still talking about ways to unwind select parts of the tax cuts and jobs act that came through the reconciliation when Republicans took power in 2017. You get the point.
You can’t help but notice that the debt relief in the LSG package isn’t limited to the spending side. The bill would eliminate some of the tax credits that Democrats favor, specifically the clean energy tax credits that were extended or created under the IRA. Some tax credits apply to the purchase of electric vehicles; Others involve the installation of solar panels, which reduce demands on local energy networks. The IRA combined these environmentally friendly tax cut and spending provisions to fight climate change.
California House Speaker Kevin McCarthy wants to reverse environmental spending as well as tax cuts. Each step will contribute to the reduction of the national debt. The CBO scorecard estimates the combined cost at $540 billion over 10 years. (“CBO Evaluates Cap, Save, Grow Act,” Committee for a Responsible Federal Budget, April 25, 2023.)
Make no mistake: the elimination of a tax break (even one created by an opposing party) qualifies as a tax increase. Normally, the GOP is not opposed to raising taxes. It identifies itself as a tax-cutting party that has proven an effective form of branding.
Over the years, many Republican elected officials have gone so far as to sign a pledge committing them to never raise taxes. This is not a tax increase – period. Zero exceptions and zero tolerance for anyone who dares to break a promise.
If GOP lawmakers want to change the US tax code to eliminate clean energy tax credits, so be it. This is their prerogative. But how is this not a breach of their promise?
I admit that I never liked the promise in the first place. It was always like political theater. It claims to be about reducing the size of government—”starving the beast”—even though there is ample evidence that revenue is not an effective constraint on spending. Also, if Republicans were truly looking for smaller government, they’d make a pledge against spending, but we’re still waiting for that.
The promise is now dead. . . Expired. . . Is it set to suspend indefinitely?
It’s hard to say. We’ve faced this issue before, about five years ago when the TCJA became law. One of its hallmarks was the GOP’s decision to limit the itemized deduction for state and local taxes — known as the SALT cap. This had the predictable result of forcing millions of taxpayers to take the standard deduction.
It is not my intention to revisit the relative merits of the SALT cap. (Yes, the increased use of the standard deduction makes the tax code slightly more progressive than it would otherwise be because itemized deductions disproportionately benefit high-income taxpayers). Designed and implemented by Republican lawmakers, many of whom signed the pledge.
What explains the GOP’s emerging thirst for a particular kind of tax hike? It’s all about who the target is. The nuance behind the SALT cap was that tax increases were mostly felt by residents of high-tax states. Think Massachusetts, New York, and California (blue states) as opposed to places like Texas (red states).
We’ve seen tax increases portrayed as broken promises because they mostly hurt people whose policies you disagree with. This sounds less like an endorsement of enlightened fiscal policy and more like an expression of crude political impulses.
Today, in the context of LSG, we have the same tendency towards doublespeak. We understand that the Democrats’ environmental tax credits should be defined as a form of spending, and that their repeal by House Republicans becomes an acceptable place for the signatories of the pledge. This is, of course, a claim, and everyone knows it.
He argues that outright tax increases don’t count as one, as much as they represent a setback for Democrats and their environmental agenda. Never mind that Sen. Joe Manchin III, DW.Va., was the chief architect of the IRA, and he’s hardly barking at trees.
The play is clear: It’s perfectly acceptable for Republicans to raise specific taxes in specific cases, as long as it’s under the banner of “Libs Owning.” No problem; This is politics. Just know that when you choose, when a promise is made, it loses all credibility. He may never have had much, anyway.