As Senate Republicans work to develop their own version of the “One Big Beautiful Bill” (OBBB) passed by the House last month, one of their biggest priorities is making temporary tax provisions permanent. In a recent interview, Senate Finance Committee Chairman Mike Crapo argued that “certainty in the tax code” is essential for businesses to plan their operations. Senate Majority Leader John Thune also recently said that his conference “believe[s] that permanence is the way to create economic certainty.” But there can be no certainty in any tax policy so long as there remains an unsustainable mismatch between federal revenue and spending levels — which the OBBB would make significantly worse.
The United States is already on an increasingly unsustainable fiscal path. The national debt today is almost the same size as the country’s gross domestic product (GDP), while annual interest payments on that debt are bigger as a percent of GDP than at any other point in American history. If the OBBB becomes law, the government will be on track to borrow another $2 trillion to cover the difference between spending and revenues every single year going forward. But debt cannot grow faster than our economy forever because, at a certain point, there will not be enough economic activity for the government to tax or borrow from to continue paying ballooning interest costs. The policies in OBBB would only increase the probability that our economy will experience such a fiscal crisis within the next few decades.
Whether they do it to prevent a crisis or react to one, lawmakers will inevitably have to change fiscal policies that result in unsustainable deficits. So if Senate Republicans were truly interested in using permanent policy to provide certainty to taxpayers, they would prioritize policies that reduce the budget deficit over those that increase it.
Fortunately, there have been many policy options discussed in recent months that the Senate could adopt to bring down the OBBB’s costs. Lawmakers could tighten the deduction for state and local income taxes paid by businesses — as PPI suggested in our last Budget Breakdown. Preventing wasteful overpayments in Medicare Advantage, which the Senate considered this week before backing off, could reduce spending by hundreds of billions of dollars without cutting benefits. The Senate could also incorporate tax changes previously considered by their colleagues in the House, such as increasing the excise tax on stock buybacks to create parity with dividends or further limiting the business deduction for employee compensation. President Trump has proposed several possible offsets of his own that were omitted from the bill, such as closing the carried interest loophole or introducing a new top income tax bracket for households with the highest incomes. And lawmakers can find even more possible offsets in the budget blueprint published last year by PPI, which includes enough savings to put the budget on a path back to balance by 2050.
If Senate Republicans refuse to incorporate any of these common-sense proposals to mitigate the OBBB’s deficit impact and put the nation on a more sustainable fiscal path, whatever tax provisions they enact would be permanent in name only. Under pressure from out-of-control debt and interest costs, future Congresses will inevitably have to revisit the policies put in place by today’s. Senate Republicans must remember that the only way to truly provide tax certainty is by building a sustainable fiscal foundation.
According to new analysis from the nonpartisan Congressional Budget Office, passing the OBBB would cause the bottom 10% of American households to lose roughly $1,600 per year, while the top 10% would gain $12,000 per year.
