Academic journal article Law and Contemporary Problems

Tax Law and the Eroding Budget Process

Academic journal article Law and Contemporary Problems

Tax Law and the Eroding Budget Process

Article excerpt



Tax scholars have long lamented the tendency of the budget process to blemish tax policy. The budget process takes pristine tax concepts and subjects them to its rules and gimmicks so that they are unrecognizable by the time they leave Congress. (1) The 2017 Tax Cuts and Jobs Act (TCJA), the largest overhaul of the tax code since 1986, is an example of this phenomenon, with its many sunset provisions, phase-ins, and revenue-forced policies. (2)

The relationship between tax and budget rules, however, is not unidirectional. Increasingly, political pressures to enact tax legislation also impact the budget process, with enduring consequences that sometimes reach beyond tax law. Most recently, partisan conflict over the 2017 tax legislation challenged fundamental aspects of the budget process--such as the length of budget windows, the construction of budget baselines, even the independence of the estimators--in order to fit the law through the requirements of the budget reconciliation process. The succumbing of these fundamental features of the budget process to partisan wrangling presents challenges for which the existing budget institutions were ill-designed to meet.

Lawmakers adhered to many of the budget process rules in a formal sense, which could be viewed as demonstrating the resiliency of the budget process. There is reason, however, to not be so optimistic. The budgetary disputes heavily shaped the contours of the legislation, exacerbating the tendency of lawmakers to disregard long-term fiscal concerns and contributing to revenue losses of $1.9 trillion in the TCJA's first ten years. (3) Additionally, the extent to which the 2017 tax legislation challenged the budget process likely has eroded important budget norms, casting doubt upon their staying power going forward. Thus, tax policy has impacted budget policy by encouraging the ill-conceived use of reconciliation to ease the passage of revenue-losing legislation, while also creating pressure for Congress to unshackle itself from the budget process. This Article identifies points of instability in the budget process and offers suggestions for improving those areas in light of the new strains placed upon them.

Part II discusses the recent expansion of the budget reconciliation process and accompanying budget gimmicks to accommodate ambitious tax legislation. Part III examines the effect of TCJA upon the budget process and the latter's impact upon the enacted tax policy. It then offers possible ways to reduce the undesirable consequences of these interactions. Part IV discusses general conclusions about the state of the budget process and more ambitious reforms of it.



In the spring of 2017, Senate Republicans deployed the so called "nuclear option" to remove the filibuster obstacle to confirming Supreme Court nominees, (4) thereby empowering the simple majority in an institution that has traditionally privileged the rights of the minority party. This development may have seemed like a paradigm shift from the Senate's standing as the more deliberative body, but the shift has not been sudden. Instead, the shift has been a result of a long path of steady erosion of the filibuster.

The budget reconciliation process allows for the passage of legislation that avoids a Senate filibuster. (5) The scope of the process has expanded in the past few decades to encompass large tax cuts and parts of health care reform. (6) This legislation would have otherwise failed due to a lack of bipartisan support. In many ways, the expansion of the reconciliation process tracks increasing obstructionism by the minority party. Reconciliation has become a release valve for the legislative filibuster, perhaps allowing it to endure longer than it otherwise would.

But reconciliation was not designed to accommodate such ambitious legislative efforts. To fit such laws within reconciliation's confines, the majority party has had to employ several budgetary devices, which have consequences upon the budget process. …

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