A new analysis from the Penn Wharton Budget Model at the University of Pennsylvania shows that the Senate tax bill would violate the Byrd Rule that, in this case, requires that the legislation not increase deficits after 2027.
Starting in 2028, the analysis finds, net revenue losses are reduced — but not eliminated: “in each of the years between 2027 and 2033, PWBM projects that the bill will continue to reduce revenues net of outlays, not including the additional costs of debt service. In contrast, the Byrd Rule prohibits a decrease in net revenue in any year after the 10-year budget window, not just revenue neutrality across time after the first 10 years. As a result, by our calculations, the Senate’s TCJA (Amended) does not satisfy one of the key requirements of the Byrd Rule.”
The analysts cite three reasons the Senate bill continues to lose revenues beyond the 10-year budget window. First, while many individual tax cuts expire, most of the corporate tax cuts do not. Second, taxpayers are likely to shift income to earlier time periods to exploit those tax cuts that do expire, reducing income reported after the 10-year budget window. And third, taxpayers are likely to redirect income to pass-through or other relatively favorable structures to reduce their marginal rates, permanently lowering tax receipts.
While there’s no guarantee that the official budget scorekeepers at the CBO and JCT will agree with all the details, the Penn Wharton analysis does point to a potential problem for Senate Republicans as they try to push their tax bill through Congress in record time.