Republicans May Not Be Able to Go It Alone on Tax Reform

Republicans May Not Be Able to Go It Alone on Tax Reform

REUTERS/Carlos Barria

Republicans hope to use the budget reconciliation process to pass tax legislation with a simple majority in the Senate, thereby eliminating the need for any votes from Democrats. But a law from 2010 called PAYGO – the Statutory Pay-as-You-Go Act – may complicate that plan.

The law requires Congress to evaluate the budgetary effects of all new legislation at the end of each year (see the 2016 version here). If the review determines that the federal government will add to the deficit after five years, and Congress doesn’t pass a waiver, automatic spending cuts kick in that would affect many programs, including Medicare.

Since Republicans have signaled that they are interested in tax cuts that could cost as much as $1.5 trillion, it’s likely that PAYGO may come into play. A waiver would require 60 voters in the Senate, meaning that at least a few Democrats would have to get on board.

While there are still a multitude of details that need to be worked out on the Republican tax plan and its possible fiscal effects, it’s worth noting that there’s a good chance Republicans will need help from Democrats at some point in the process, potentially providing the opposing party with considerable leverage over the final shape of the legislation.