Republicans Warm to Tactic for Making Deep Tax Cuts Last Longer

(Bloomberg) -- A top Senate Republican threw his support behind a push to change congressional budget rules to relax time limits on tax cuts that increase the federal deficit.

“It would be better” if the existing 10-year budget window were extended, Finance Committee Chairman Orrin Hatch, the chamber's top tax-writer, said in an interview. “The 10 years is problematic,” he said. “I would like to do that.” A leader of the conservative House Freedom Caucus said he's open to the idea.

The change would make it easier for the GOP, which controls only 52 of the Senate's 100 seats, to enact longer-lasting tax cuts without any support from Democrats. Under current Senate rules, any legislation that passes with fewer than 60 votes can't add to the deficit outside a 10-year budget window, otherwise the tax changes would have to expire.

Senator Pat Toomey, a Pennsylvania Republican, is pushing to increase that time horizon to 20 or 30 years. And Treasury Secretary Steven Mnuchin said during a hearing earlier this week that he was open to considering Toomey's proposal -- if there's no hope of winning Democrats' support for a tax plan.

“I am hopeful that we can still get some bipartisan support,” Mnuchin said in response to a question from Toomey. “But as you said, if we can't, reconciliation is an alternative and I look forward to working with you and the Senate on ideas such as a 20-year window as opposed to a 10-year window to explore that.”

The idea would mark a sea change for the budget rules and draw fierce objections from Democrats. It may gain additional support from other Republicans who have become frustrated by the overall budget process. Senator Lindsey Graham of South Carolina has said he's open to extending the 10-year window, but Senator Bob Corker of Tennessee said he'd be skeptical of any idea that makes it easier to raise the deficit.

The Congressional Budget Office and the Joint Committee on Taxation typically provide estimates on the budgetary effects of proposed tax legislation.

‘More Sensible'

Conservative groups such as the Club for Growth as well as anti-tax activist Grover Norquist have also suggested changing the budget rules as a way to get a tax overhaul done.

“We say extend the budget window to 25 years. Why? Because the people creating jobs and investing in new products think long-term,” Norquist and Club for Growth President David McIntosh said in a Wall Street Journal op-ed on June 13. They cited how budget rules say only that the window has to be at least five years.

Last month, Hatch didn't directly back the Toomey proposal, but said he was open to anything that made sense. The Utah Republican didn't specify how long the budget window should be during the interview Thursday, but signaled openness to the 25-year idea. “Whatever,” he said, adding he wants it to be “more than the current 10 years.”

“It makes it more sensible, too,” Hatch said. “It's hard to get these budget things done.”

Hatch's counterpart in the House, Ways and Means Chairman Kevin Brady, told reporters on Thursday he'll evaluate proposals to extend the budget window. But the Texas Republican said he remains committed to permanent tax reform that “balances within the 10-year budget timeline.”

Freedom Caucus

The escalating push to change the rules comes amid signs that Republicans are deeply divided on how to raise revenue to pay for the steep individual and corporate tax-rate cuts they want.

Representative Mark Meadows, the chairman of the conservative House Freedom Caucus, said he's open to extending the 10-year window, arguing that doing so would make it easier to cut taxes.

“I don't know that 25 years is the right time, but doing a 15- to 20-year budget window seems to make some sense,” the North Carolina Republican said Thursday. “We sometimes hamstring ourselves with a 10-year budget window.”

But he cautioned that it should not become “a license to increase the deficit.”

To contact the reporter on this story: Sahil Kapur in Washington at skapur39@bloomberg.net.

To contact the editors responsible for this story: Alexis Leondis at aleondis@bloomberg.net, John Voskuhl