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Sticker Shock: Senate Dems’ Budget Actually Has $1.5 Trillion in Tax Hikes



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On Wednesday, Senate Democrats unveiled their first formal budget resolution in nearly four years. Initial reports, as well as official Democratic talking points, indicated that it would raise about $1 trillion worth of new taxes by closing loopholes that, in the words of Senate budget chair Patty Murray (D., Wash.), “mainly benefit the well-off and well-connected.”

In fact, that figure appears to dramatically understate the true size of the tax hikes Democrats are proposing, according to Republican Budget Committee staff. Murray’s budget calls for $975 billion in new taxes over 10 years via the elimination of loopholes and deductions (the net revenue is somewhat reduced, to about $923 billion, by the budget’s extension of some temporary tax credits). However, the proposal also includes $508 billion in additional tax hikes that do not appear in the budget’s summary tables, but are outlined in what are known as “reserve funds.” These are essentially off-the-book portions of the budget that, according to the budget, “allow the Chairman to revise committee allocations, budgetary aggregates, and other levels in the resolution for deficit-neutral or deficit-reduction legislation.”

A Republican budget aide explains that these funds, which are typically included in all congressional budgets, are designed to provide a “fast-track process” for future spending (or tax-cutting) legislation by preemptively outlining a means to pay them without violating the spending (or revenue) limits imposed by the budget, or in this case, the statutory caps set by the Budget Control Act of 2011. The aide says Murray is using the reserve funds to outline more than $508 billion in additional tax hikes, as well as $100 billion in stimulus spending, without actually incorporating them into her budget.

In her budget summary, the aide points out, Murray takes “rhetorical credit” for replacing sequestration, the roughly $1 trillion in automatic spending cuts that recently took effect. Murray proposes to do so with a “balanced mix of changes made in revenues and spending,” and specifies “$480 billion in new revenue raised by closing loopholes” for this purpose. The summary tables in her budget include a footnote explaining that her budget baseline “assumes that the sequestration process . . . is replaced.” And in doing so, she misleadingly claims additional deficit reduction from sequestration, while the same tax revenue is supposed to be devoted to reducing the deficit. As a member of Murray’s staff admitted at this morning’s budget markup hearing, when replacing the sequester is taking into account, the Democrats’ claim of $1.85 trillion in total deficit reduction shrinks to about $700 billion.

The $480 billion in additional tax hikes are not reflected in Murray’s budget tables, the aide explains. Instead, they have been set aside in a reserve fund, from which they could be promptly incorporated into future legislation to replace the sequester. The same is true of the $100 billion in stimulus spending Murray has outlined, which would be “fully paid for by eliminating loopholes.” This does not appear Murray’s spending or revenue tables either, but is simply being held in reserve, most likely to hide its impact on spending and revenue levels.

A full accounting would bring the total tax increase Democrats are proposing to more than $1.5 trillion. That is more than double the size of the tax increase Congress recently approved as part of the fiscal-cliff deal, and presumably more than what a number of Democrats, particular those from red states facing reelection in 2014, would be comfortable supporting.

Senator John Thune (R., S.D.) slammed the Democratic proposal in a statement Wednesday. “Their budget would raise taxes on Americans by $1.5 trillion to pay for increased spending — this is on top of the $1.7 trillion in tax increases already signed into law during the Obama administration,” he said. “The policies of big spending and big government have led to a dismal average economic growth rate of just 0.8 percent over the past four years. It’s time to grow the economy, not the government.”



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