Republicans Effectively Voted to Raise Taxes. They’re Fine With That.
April 29, 2023 | By Richard Rubin
The party, united for decades around the view that net tax increases are unacceptable, on Wednesday advanced debt-ceiling legislation that would raise taxes by more than $300 billion over a decade, according to official congressional estimates.
The bill, which passed in the GOP-controlled House and won’t survive the Democratic-led Senate, would repeal clean-energy tax credits that Congress created last year. The changes would shrink breaks for wind energy, solar power, hydrogen and electric vehicles, effectively raising taxes on some manufacturers, car buyers and others.
Top Republicans see such clean-energy subsidies as more like spending rather than tax reductions, and they say their debt-ceiling bill would end such inefficient, expensive programs created by Democrats. They also promised that any final bill wouldn’t include net tax increases. Republicans continue to oppose tax hikes President Biden has proposed for high-income households and corporations, and they are proposing further tax cuts for businesses and individuals.
Still, their willingness to advance a bill that the nonpartisan Congressional Budget Office says would raise tax revenue shows Republicans are less focused on official tax tallies and more determined to reverse Mr. Biden’s agenda.
“We know that these green-energy policies that the Biden administration has forced down the throat of Americans is not good for this country,” said Rep. Drew Ferguson (R., Ga.). “It’s not good for American competitiveness, and I really don’t care what the CBO score is. What I care about is doing the right thing.”
The House legislation would raise the debt ceiling in exchange for deep government-spending cuts and was aimed at jump-starting talks with Mr. Biden. The White House has insisted that Congress raise the $31.4 trillion borrowing limit without any other provisions attached.
The CBO found that the House GOP bill would cut projected government deficits by $4.8 trillion over 10 years, before a few minor last-minute revisions. The bill contains tax increases that total at least $515 billion over a decade, according to the nonpartisan Joint Committee on Taxation. That estimate is likely low because it doesn’t yet include the effect of eliminating electric-vehicle credits, which would likely raise billions of dollars more.
The House bill included one revenue-reducing provision—rescinding new enforcement funding for the Internal Revenue Service. That would lower tax revenue by $191 billion, so when laid against the energy-tax changes, the bill still raises taxes overall.
In the past, that imbalance might have given Republicans heartburn. The GOP-backed 2017 tax law, for example, repealed or limited many tax breaks, but those were far outweighed by tax cuts. Republicans sparred among themselves in 2011 over whether to curb ethanol tax breaks without cutting taxes elsewhere.
Most Republicans have signed a no-tax-hike pledge written by Grover Norquist’s Americans for Tax Reform. As top party leaders rallied votes for the debt-ceiling bill, they promised lawmakers that the final version won’t raise taxes.
Rep. Jason Smith (R., Mo.), chairman of the House Ways and Means Committee, wrote in a letter to House Speaker Kevin McCarthy (R., Calif.) that the debt-ceiling bill wouldn’t actually raise taxes. He said ending some clean-energy tax credits should be treated as cutting spending. And—citing Biden administration estimates—he wrote that the IRS changes would have a bigger impact in lowering tax revenue than CBO says.
In his reply—which, like Mr. Smith’s letter, was posted online this past week—Mr. McCarthy agreed.
“Rest assured,” he wrote, “I will continue to hold the position that House Republicans will not support a tax increase as part of any bill presented to the President to address our spending problem and the debt limit.”
Some Republicans who were wavering on the debt-ceiling bill, such as Rep. Nancy Mace (R., S.C.), argued that it would raise taxes. But the bulk of House Republicans focused on their objections to Democrats’ renewable-energy policies.
The clean-energy tax breaks and IRS expansion that Republicans want to eliminate were established in the climate, health and tax law known as the Inflation Reduction Act. Congress passed the law last year with no Republican votes. Democrats view it as a pillar of their efforts to fight climate change and tax cheating, and say the GOP plan would imperil both efforts.
“What you’re looking at is the tax credits that are going to some of our nation’s largest companies,” Rep. Bryan Steil (R., Wis.) said. “I’m looking at that, saying that’s crony capitalism that’s in place.”
Targeted tax credits have long been a means for the two parties to find common ground on legislation. Democrats have used them to advance federal policies that would be politically harder to pitch as spending programs, while Republicans could point to them to say they backed tax cuts.
Now, some in the GOP say that labeling a policy as a tax cut doesn’t automatically mean they will keep it in place.
“One reason I support this is because it gets rid of the EV credits, picking winners and losers,” Rep. Roger Williams (R., Texas) said of the debt-ceiling plan. “I think it’s a bill that saves America, saves the financial stability of the country.”
Republicans can tell their supporters at home that they are reversing Mr. Biden’s energy policies, a move that could assuage voters worried about increasing federal revenue, said Sage Eastman, a former House GOP tax aide.
“Not all tax cuts are created equal any more,” he said.
Lindsay Wise contributed to this article.
Write to Richard Rubin at [email protected]