The Reason the Senate’s Tax Bill Seems Cheaper Than House Version.

The east side of the US Capitol in the early morning. Senate Chamber in the foreground.

Congress’s Joint Committee on Taxation estimated that Senate Republicans’ proposed tax bill will cost the federal government far less in reduced tax collections than the $3.8 trillion tab for the House version, even though both bills share many provisions. The estimate on the Senate bill was based on a different accounting method.

Late on Saturday, the Joint Committee on Taxation released an estimate indicating the tax bill proposed by Republicans in the Senate would cost $441.5 billion over the next decade, significantly less than the $3.8 trillion estimated cost of the House’s version. The catch: The GOP requested the committee base its estimate on the “Senate’s current policy baseline.”

The “current policy baseline” approach compares outcomes with current regulations, rather than with the regulations that would be in place if the bill does not pass. In this case, the most notable examples are the temporary 2017 tax cuts the bill would make permanent. In doing so, the estimate minimized the cost of the bill’s most expensive sections, leading to the significant disparity between the two estimates.

For example, making the tax cuts permanent would cost the government $83 billion in revenue, according to the estimate of the Senate’s bill, compared with $2.2 trillion according to the estimate of the House version. Expanding the Child Tax Credit was estimated to cost $800 billion under the House bill; the estimate fell to $124 billion in the Senate’s version.

Meanwhile, many smaller-dollar provisions, such as creating “Trump accounts” to help children save in a tax-advantaged account, were listed with the same costs in the JCT’s estimate of both bills.

Parliamentarian Strikes Provisions

In addition to receiving a cost estimate from the Joint Committee on Taxation, the Senate tax bill also lost some provisions to decisions by Senate Parliamentarian Elizabeth MacDonough.

Over the weekend, MacDonough slashed several proposals from the bill that her guidance said did not fit within the budget reconciliation process. MacDonough’s opportunity to weed out parts of the bill stems from the “Byrd Rule,” which prohibits provisions considered “extraneous” to the federal budget in bills passed through reconciliation, as Republicans are attempting to do.

So far, MacDonough—who has served in the role since 2012—has cut proposals that would have defunded the Consumer Financial Protection Bureau; a provision requiring states to pay a portion of food assistance benefits; and a section that would have allowed states to conduct border security and immigration enforcement, which are responsibilities of the federal government.

Notably, in her June 21 guidance, MacDonough’s review retained in the bill a provision that bans states from regulating artificial intelligence over the next 10 years.

“There is no better way to define this ‘Big Beautiful Betrayal’ of a bill than families lose, and billionaires win,” said Senator Jeff Merkley, D-Oregon, the ranking member of the Senate Committee on the Budget, in a statement. “Democrats are on the side of families and workers and are scrutinizing this bill piece by piece to ensure Republicans can’t use the reconciliation process to force their anti-worker policies on the American people. The Byrd Rule is enshrined in law for a reason, and Democrats are making sure it is enforced.”

Tags: Artificial Intelligence, budget reconciliation, federal budget, US Tax Policy