Use Expiring Trump Tax Cuts To Overhaul The Entire Tax System, Groups Say

The $4.6 trillion in tax cuts that expire next year offer a chance to completely revamp the U.S. tax system that should not be missed, more than 100 progressive and economic groups said Tuesday.

“We urge you to use the expiration of these provisions as an opportunity to address long-standing problems with our tax code, not just to tinker around the edges,” the groups said in an open letter to party leaders and key tax writers on Capitol Hill.

“Congress should pursue reforms — including corporate tax reforms — that stem the decades-long tide of tax cuts for the rich and corporations that have undermined fairness, eroded revenues needed for pro-growth investments, and stifled economic opportunity,” they said.

Signers to the letter included the AFL-CIO, the Center for American Progress, the NAACP and Groundwork Collaborative.

The 2017 tax cuts enacted by a Republican Congress and then-President Donald Trump came in two varieties — corporate tax cuts, the bulk of which were lower rates, and individual household cuts, which consisted of lowered rates but also things like breaks on estate taxes and investments.

In a recent report, the nonpartisan Congressional Budget Office said extending the lower individual rates would result in a loss of $3.3 trillion in revenue over 10 years and cost another $467 billion in interest. Adding in the other household provisions brings the total to $4.4 trillion, while extending two small expiring business breaks would bring the total to $4.6 trillion.

Because of congressional budget rules, the full package could not be made permanent, so Republicans had to pick some tax cuts to be temporary, with the idea that lawmakers would be afraid to let them expire later. The same strategy was taken by President George W. Bush, who saw almost all of his tax cuts extended in 2012’s “fiscal cliff” episode.

In the letter, the groups said wealthy households and corporations should pay more in taxes than they do now, overall tax revenues should be increased by more than just the amount of the expiring provisions, and the tax overhaul should result in a more sustainable and equitable tax code.

“The last 25 years have been a one-way trend down in terms of revenue. It has undermined fiscal sustainability. It has undermined our willingness to invest in the core things the American people want. It has called into question our commitments to things like Social Security and Medicare,” Michael Linden, a former executive associate director at the White House Office of Management and Budget under Joe Biden, said in a call with reporters.

Trump has said he would like to see corporate taxes cut even more and raised the prospect of deeper household tax cuts.

Deficit hawks have seen the expiration of part of the 2017 tax law as an opportunity to boost revenues and narrow the government’s budget deficit, which has remained stubbornly high even as the economy has rebounded vigorously from the drop from the onset of the COVID-19 pandemic.

Bharat Ramamurti, former National Economic Council deputy director under Biden, said there was no consensus between the groups on whether all the new revenues from a tax overhaul should go to new initiatives or whether some should be used for deficit reduction.

“There is broad agreement among this group that we do need to end this process with a higher percentage of GDP coming in in revenue than if we simply let these 2017 provisions expire,” he said.