So, first things first: there have been no tax cuts. This does not mean there will not be tax cuts (in fact, I’m quite sure there will be) but the Senate vote yesterday didn’t make that happen. Here’s where we stand.
The Senate is in the process of crafting a budget for the 2018 fiscal year. Time-wise, we’re already behind: Typically, the government’s fiscal year ends on September 30 and the new fiscal year begins on October 1.
The delinquency shouldn’t come as a shock: Congress didn’t put together a budget on time for the 2017 fiscal year either. Because of the November 2016 elections, Congress failed to pass a long-term bill for fiscal year 2017. Then, the Trump administration advised Congress that it wanted to be involved in spending discussions and asked for a delay. Congress extended the deadline by cobbling together a series of funding measures, raising concern about a potential government shutdown. Fortunately, that didn’t happen.
But here we are again.
On a basic level, the federal budget outlines how we plan to spend money during the fiscal year. We need money in order to spend money – that’s where tax revenue comes into play. Republicans in Congress are hoping to pass tax cuts worth nearly $1.5 trillion. Those tax cuts are a big deal as midterm elections approach because most taxpayers are in favor of some form of cuts.
So what’s the problem? Pushing those tax cuts through without corresponding cuts in spending will increase the deficit. That’s not good politics for a party which prides itself on fiscal responsibility. The Trump administration has suggested that any shortfall will be made up in economic growth.
That controversy initially put the Senate budget bill in doubt. It also explains the numerous votes (21 roll call votes) and amendments (456) associated with the bill. Still, the Republicans kept pushing, with Senate Majority Leader Mitch McConnell (R-KY) saying, “Passing this budget is critical to getting tax reform done, so we can strengthen our economy after years of stagnation under the previous administration.”
In the end, the measure passed by a slim margin of 50-49. All Republicans in the Senate voted in favor of the bill, except one: Sen. Rand Paul (R-KY) who objected to the bill because it increased the deficit. All of the Democrats voted against it. You can view the votes here.
Despite the vote, we don’t actually have a budget. The bill “establishes the congressional budget for the federal government for FY2018 and sets forth budgetary levels for FY2019-FY2027.” The Senate calls it a “blueprint for the budget.” (I guess building terms are in vogue: just last month, we had a framework for tax reform.)
Spending cuts are included in the budget blueprint. However, they are not expected to offset the loss in tax revenue. That’s a problem. Here’s why: Current Senate rules do not allow for a budget that would increase the deficit. That’s because of a rule known as pay-as-you-go, or PAYGO. The PAYGO rules were first introduced in 1990 under President George H. W. Bush as part of the Budget Enforcement Act of 1990. PAYGO rules have changed over the years but the basic idea is that the Senate should not be allowed to make long-term plans to spend money that doesn’t exist: spend only what you have. If a bill doesn’t pay for itself and if, averaged over six and 11 years, the bill would increase the deficit, it’s in violation of the rule. To move it forward would require 60 votes. The Republicans in the Senate don’t have 60 votes. Right now, they just have 51 votes.
In contrast, the House version of the budget does not propose an increase in the deficit.
So what to do? Pass a blueprint which suggests extensive cuts but does not require them. To be fair, that’s sort of what you expect in reconciliation. A budget resolution is never explicit; the specifics get hashed out later, in various committees. But this time, the resolution is being pushed through with the understanding even draconian cuts will likely not offset the tax cuts as written – the deficit is going up.
Republicans are, however, desperate for a win. Tax cuts should be an easy win because who doesn’t want to pay less in taxes?
(And yes, almost everyone has skipped right over the premise that it’s tax reform: we’re now talking about tax cuts.)

So for good measure, Senate Budget Committee Chairman Mike Enzi (R-WY) submitted an amendment, which passed 52-48, to speed up the process. Now, the budget can be green-lighted without all of the mess and bother in committee, subject to certain restrictions. Forbes contributor Stan Collender says that, with Enzi’s amendment, the “tax side doesn’t have to be combined with the spending side in the same bill.” Procedurally, that makes it easier to push through. But contextually, it’s kind of like making out your shopping list without considering the amount of your paycheck.
The House will take up the measure next week. As part of Senate resolution, the Committees for the Senate and the House are slated to release their tax bills by November 13.
And believe it or not, so far, this is the easy stuff. The real conflict is yet to come: Congress and the White House must still agree on discretionary spending measures. Failure to reach an agreement by December 8 could result in a government shutdown.
So that win? It’s all procedure. If the headlines suggesting that this was something more have your head spinning, you’re not alone. Sen. Bob Corker (R-TN) said about the vote, “This is the biggest hoax cast upon the American people ever that this budget process even exists. The only thing about this that matters is in preparation for tax reform.” Corker voted yes on the bill.

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Kelly Erb is a tax attorney, tax writer and podcaster.

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