Bipartisan tax deal would cost much more than $500 billion over 10 years: Fiscal watchdog says

The tax deal announced by Senate Finance Committee Chairman Ron Wyden, D-Ore., and House Ways & Means Committee Chairman Jason Smith, R-Mo., would cost above $500 billion over 10 years and possibly more down the line if its extensions are made permanent, according to a budget watchdog group.

The agreement would "expand the Child Tax Credit by increasing the refundability cap, phasing in the credit for multiple children concurrently rather than consecutively, and indexing the credit to inflation from 2023 through 2025," read an analysis from the Committee for a Responsible Federal Budget (CRFB) released on Tuesday. 

"Additionally, their plan would revive 100% bonus depreciation for equipment purchases and the pre-2022 looser cap on interest deductibility in full while reviving research expensing for domestic research only – all through 2025 – in addition to several smaller tax provisions for Taiwan and disaster relief," the analysis also read.

To lower the cost, the deal includes "new restrictions on the pandemic-era Employee Retention Tax Credit (ERTC) in an effort to reduce fraudulent and unnecessary payments" from being issued. The negotiators estimate that the proposal would cost $80 billion over ten years, which would be "fully offset" by the proposed ERTC reforms.

Despite this, the CRFB estimates that cost to be much higher: "We estimate the plan would cost more than half a trillion dollars over a decade if the policies were made permanent without further offsets," read their analysis.

Maya MacGuineas, president of the watchdog group, applauded the lawmakers for finding a way offset their estimated cost of the deal but cautioned that it would grow over time add to the nation's budget deficit. 

The U.S. Department of Treasury confirmed earlier this month that the fiscal year 2023 deficit was $1.8 trillion. In fiscal year 2019 prior to the COVID pandemic, the deficit was slight more than $980 billion. It shot up to $3 trillion in FY2020 after Congress passed several economic stimulus packages during the pandemic. 

"Yet even with these offsets, this package will add to the deficit over the next few years and could set the stage for substantially more debt over time. Because of timing issues related to business provisions, the official score significantly understates the plan’s costs," MacGuineas said in a published position statement.

"The plan also irresponsibly offers retroactive windfalls that will do nothing to help the economy and indexes provisions to grow over time without an offset that would also grow over time. Unless the objective is pure corporate giveaways, the retroactive provisions should be dropped from this package," she added.

MacGuineas in her statement called on Congress to "stop the practice of passing temporary tax and spending policies with arbitrary sunsets that exist only to hide the true costs" over longer periods of time. "Policymakers already face nearly $4 trillion of policy expirations at the end of 2025, and this package would lead this cost to grow massively."