The House Ways and Means officially opened debate in the 119th Congress regarding the future of the Tax Cuts and Jobs Act by pitting an increase in the national debt against growing the economy.
The tax debate is extremely high stakes for the municipal finance community, with many muni advocates worried that the tax-exemption could fall into the crosshairs in an effort to offset lost revenue from extending the Trump tax cuts.
"During the first Trump presidency, the tax cuts were the rocket fuel that propelled America out of the stagnation of the Obama years," said Committee Chairman Jason Smith.
"By every conceivable measure, American workers and the economy were better off. Americans earned bigger paychecks, unemployment for every group was at historic lows, and poverty dropped to its lowest level in American history."
The Democratic minority contends that all the growth was financed by ballooning the national debt and extending the TCJA will make things much worse.
"I don't understand the logic of suggesting that we're going to attack the national debt and simultaneously add $4 trillion to it by a tax cut proposal," said ranking Democrat Richard Neal.
The comments came during a hearing held by the House Ways and Means Committee on Tuesday dedicated to detailing the pros and cons of extending the TCJA.
The TCJA contained two controversial and difficult provisions for the muni community by including the end of advance refunding of tax-exempt bonds and putting a $10,000 cap on the state and local deductions.
The two parties agree on many provisions of the contentious legislation including not raising the individual tax rates for middle class families but adjusting the corporate tax rates and tinkering with the SALT deduction are still open for debate.
Republicans attempted to prove their point that the TCJA should be extended by salting the witness list with small business owners, accountants, and a concerned parent.
Keeping the Child Tax Credit in place, extending the Section 199A deduction for qualified business income, the fine points of amortizing research and development expenses, and keeping the changes to the estate tax rates were presented as reasons to not change a thing.
Democrats fired away at reducing the national debt by way of raising taxes on the rich and corporations by quoting from their opposition.
"'I'm for a dramatic increase in corporate taxes. We have to increase taxes on the wealthy for getting our guy's tax cuts,'" said Rep. Lloyd Doggett, D-Texas. "Those are not my words. They're not a message from the Progressive Caucus, but rather the recent comments of Steve Bannon, sometime Trump adviser, and about as MAGA as you can get."
"It's encouraging that for the first time we see at least some elements of the Republican Party that recognize tax reality that you just can't cut revenue without adding to the national debt, and you cannot just pour some magical dust on it and ignore what you've done."
Adding to the national debt will come into play in the upcoming debates over raising the debt ceiling which in turn affects the nation's credit rating.
Also on Tuesday, Chairman Smith also announced the Committee's subcommittee chair assignments for the 119th Congress.
Rep. Vern Buchanan, who was a candidate to head Ways and Means in the 118th Congress will remain as the chairman of the Health Subcommittee. Rep. David Schweikert stays in charge of the Oversight Subcommittee.
Rep. Ron Estes will take over the chairman of the Social Security Subcommittee replacing Rep. Drew Ferguson who announced he was retiring from Congress in December 2023 and did not seek reelection.
Rep. Mike Kelly will stay on as chairman of the Tax Subcommittee and Rep. Adrian Smith has been renewed as chairman of the Trade Subcommittee.
Rep. Darin LaHood remains chairman of the Subcommittee on Work and Welfare.
