On Thursday, Republican senators responded to their fiscally conservative colleagues' concerns by agreeing to automatic tax cuts — potentially reaching $350 billion over 10 years — in the event that federal revenue dips below a certain amount.
Starting in 2022, the tax increases would vary depending on the size of the shortfall in federal revenue. The government would obtain the revenue through a corporate tax hike as well as a new tax based on the difference between corporate book income and actual taxable income, Bloomberg reported.
Bloomberg had more details on criteria for the revenue threshold:
Tax increases would be triggered if federal revenue fell short of a specified threshold. That threshold consists of the revenue baseline that’s anticipated under current law over the next five years — minus an amount that would have been lost under corporate expensing provisions that Congress has been allowing on a year-to-year basis. (The Senate bill would allow for full, immediate expensing of equipment purchases through 2022, at an estimated cost of $61.3 billion.)
News of the proposal came on the same day the Joint Committee on Taxation estimated the Senate's version of tax reform would, after accounting for the additional revenue gained through economic growth, deepen the deficit by $1 trillion.
Including a trigger for new tax increases could be the key to garnering support from deficit hawks such as Sen. Bob Corker (R-Tenn.) and Sen. James Lankford (R-Okla.), who initially pushed the idea.
Those two, along with others, cautioned early on that the cost of tax reform might be too much and indicated that a higher cost might dissuade them from supporting it.