Policy

House Democrats’ budget to assume corporate tax increase

Yarmuth aims to bring fiscal 2020 budget resolution to floor by early April

New House Budget Chairman John Yarmuth, D-Ky., wants to mark up a fiscal 2020 budget resolution in time to reach the chamber floor in early April. (Bill Clark/CQ Roll Call file photo)

Rep. John Yarmuth, the new House Budget chairman, said his chamber’s budget blueprint will aim to claw back lost revenue by boosting the corporate tax rate from its current 21 percent to as high as 28 percent, with rate increases also possible for high-earning individuals.

The Kentucky Democrat said Friday he wants to mark up a fiscal 2020 budget resolution, which will outline his party’s vision for taxes and spending over the next decade, in time to reach the House floor in early April. Yarmuth said Democratic leaders have told him they want to be ready so they can set the procedural stage for passage of all 12 appropriations bills before the August recess.

“We’ve told [Majority Leader Steny H. Hoyer of Maryland] that we will have the budget resolution to the floor by the first part of April, and that’s the schedule he wants,” Yarmuth said. 

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If Democrats can cobble together a 218-vote majority, adoption of a budget resolution will also automatically generate passage of a measure suspending the debt ceiling until Sept. 30, 2020, though the Senate would still have to get 60 votes for such a bill and President Donald Trump would have to sign it. Current expectations are that the Treasury Department will run out of wiggle room and bump up against the ceiling, which must be raised or suspended in order to avoid a catastrophic default on U.S. obligations, by late summer or early fall.

Ultimately, Yarmuth said, it will be necessary to negotiate another bipartisan deal raising the discretionary spending caps in order to provide appropriators with a runway for advancing their bills.

“If we don’t change the caps, we’d be stuck with an 11 percent cut in defense spending and 9 percent cut in nondefense,” he said. “I don’t think either side would want to do that.”

In a budget deal last February, Congress raised the discretionary spending limit for fiscal 2019 to $647 billion for defense and $597 billion for nondefense. Without action by Congress, the caps from the 2011 deficit reduction law would kick in, falling to $576 billion for defense and $542 billion for nondefense in fiscal 2020.

Yarmuth said there is little chance the House and GOP-controlled Senate will agree on a budget resolution, even though Senate Budget Chairman Michael B. Enzi of Wyoming plans to mark up a budget.

“That’s not going to ultimately set the spending limits because that resolution is not going to be passed in the Senate even if we pass it here,” Yarmuth said.

Yarmuth expressed hope a caps-raising deal will be concluded early in the year, unlike previous budget deals that were enacted after the fiscal year had already begun. “The negotiations, I think, we would want to get done by the middle of April as well so that the appropriators can begin their work at that point,” he said.

Leaders in both chambers have been quiet about their plans for a caps negotiation. The most recent caps deal, which raised the caps for fiscal 2018 and 2019, was not enacted into law until last February, five months into fiscal 2018.

Yarmuth said he hopes to be at the table along with House leaders and appropriators in negotiating a caps deal. He also is trying to set up a meeting with Enzi to discuss the budget next week.

Yarmuth’s predecessor as House Budget chairman, Arkansas Republican Steve Womack, succeeded last year in getting committee approval for a fiscal 2019 budget resolution but not until June, more than two months after the April deadline for the House and Senate to adopt a budget resolution. Womack’s budget lacked enough Republican support to be brought to the floor. Enzi skipped marking up a budget last year.

Fiscal framework

While he does not expect the budget resolution to serve as the blueprint for appropriations action, Yarmuth said the fiscal framework can serve as a guide to other tax and spending initiatives.

For example, he anticipates the budget resolution will envision changes to the 2017 GOP tax overhaul, including raising the corporate tax rate above its current 21 percent. “Oh, no question about it, absolutely,” Yarmuth said, adding that he thinks a rate “somewhere in the 25 to 28 percent range would make sense. We’ll see how much revenue we can get out of it.” The rate was 35 percent before it was cut in the GOP tax bill.

Democrats also have criticized the reduction in the top marginal rate on individuals, but it is unclear whether that cut would be targeted. “I’m not as certain about that, but certainly the corporate tax,” Yarmuth said.

Yarmuth said Democrats want to make progress against the deficit, which the Congressional Budget Office projects will climb to $1 trillion in fiscal 2020 and generally continue to rise through the decade, but that “it’s not going to be easy.”

Slowing growth in health care costs and an immigration policy overhaul could reduce spending and generate more revenue, he said.

Yarmuth said he is looking for innovative ways to shrink the deficit such as beefing up IRS staffing to collect what he said is hundreds of billions of dollars in unpaid taxes.

“There are a lot of things that we can do that I think can make a serious dent in the deficit,” he said. “I mean not the kinds of things that everybody thinks of, like raising taxes and cutting spending.”

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