Senator Lankford ignores the example of his own state if he thinks tax triggers are responsible

The United States Senate is poised to vote as early as this week on a major tax overhaul bill.  Although tax reform is the highest priority of Congressional Republicans and the White House, crafting legislation capable of securing a 51-vote majority in the narrowly-divided Senate has been a huge challenge for Republican leaders.

For several Republican Senators, including Oklahoma Sen. James Lankford, the main concern with the tax bill is the huge amount it would add to the federal deficit. According to the official estimate from the non-partisan Congressional Budget Office, the Senate bill would increase the deficit by $1.4 trillion from 2018 to 2027. Other respected estimates show an even larger deficit increase resulting from this plan.

Some Republicans have disputed the deficit projections from the CBO and other non-partisan experts, claiming that the tax cut would generate enough economic growth to fully or largely offset the loss revenue (note that no serious economist believes this). Senator Lankford, however, is urging caution. His wariness is due in part due to recent experiences in Oklahoma and Kansas, where tax cuts have failed to spark economic growth and have instead led to large budget shortfalls and the need for deep cuts to services. In a press conference this week, Sen. Lankford laid out his concerns, as reported by Talking Points Memo:

“We can’t ignore the debt and deficit issues,” he said. “As conservatives, we’ve said for a long time that to get ahead of the deficit we have to control our spending and have a growing, healthy economy. Well, if we use all of the tax reductions to just offset, we’ll never get on top of it.”

“Those of us in Oklahoma and Kansas and the middle of the country have seen some of this in our own state legislatures,” Lankford said. “It’s important to learn from what we’ve seen.”

To address concern that the tax bill will blow up the budget, Sen. Lankford, along with Sen. Bob Corker of Tennessee and other deficit hawks, have been working with Republican leaders and the White House on a “backstop” or “trigger” mechanism for when revenue gains fail to materialize. Although no specific details about the “trigger” have been shared with the public, Corker says that it would raise taxes “if the plan does not boost the U.S. economy enough,” according to CNBC.

Oklahoma’s Trigger Warning

While coupling large tax cuts to a formula that would provide for automatic tax increases may be intended to promote fiscal responsibility, the reality is that triggers are an inherently flawed policy tool. Oklahoma’s recent experience provides an especially stark example of the problem with triggers.

“Once tax policy was set on auto-pilot, lawmakers couldn’t or wouldn’t take the corrective action needed to change course.”

In 2014, Oklahoma lawmakers passed a two-phase cut to the state’s top personal income tax rate that was tied to future revenue growth. The tax cut lowering the top rate from 5.25 to 5 percent was triggered in late 2014 based on revenue projections for fifteen months out that were soon proven too optimistic. Yet once tax policy was set on auto-pilot, lawmakers couldn’t or wouldn’t take the corrective action needed to change course. The tax cut took effect in January 2016 just as the state was announcing the first of two mid-year revenue failures totaling 7 percent and was facing a $1 billion budget shortfall for the next fiscal year.  It’s notable that Oklahoma lawmakers this past session repealed the second triggered tax cut baked into the 2014 law that could have automatically lowered the income tax next year.

A federal tax trigger would differ in the details, but it would involve similar risks of bad timing. This is especially true if an automatic tax increase was triggered by declining tax revenues in the midst of a recession. As Matthew Yglesias writes:

Trigger proponents want a mechanism that will cancel tax cuts if the fanciful growth forecasts of ardent supply siders turn out to be wrong, but it’s difficult to design a mechanism that accomplishes that without also introducing an “automatic destabilizer” that delivers a hefty dose of anti-stimulus to the economy if it falls into recession.

As noted by the chief economist for the U.S. Chamber of Commerce in a blog post titled “A Fiscal Trigger is Impractical, Unreasonable, and Unnecessary,” a recession at some point in the next decade is a virtual certainty; having one hit while a trigger was in place “would create enormous problems.”

The Bottom Line

There is simply no way for Congress in 2017 to anticipate what the fiscal and economic circumstances will be over the next decade and to design a trigger that will work as intended at some point off in the future. Senator Lankford should hold firm to his insistence that the tax bill not increase the deficit and not settle for a defective substitute.

You can email Sen. Lankford here or call his office at (202) 224-5754.

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ABOUT THE AUTHOR

David Blatt helped found OK Policy in 2008 and became the organization's Executive Director in 2010. David previously served as Director of Public Policy for Community Action Project of Tulsa County and as a budget analyst for the Oklahoma State Senate. He has a Ph.D. in political science from Cornell University and a B.A. from the University of Alberta. David has been selected as Political Scientist of the Year by the Oklahoma Political Science Association, Local Social Justice Champion by the Dan Allen Center for Social Justice, and Public Citizen of the Year by the National Association of Social Workers. He lives in Tulsa with his wife, Patty Hipsher, a special education teacher in Broken Arrow, and their son, Noah.

4 thoughts on “Senator Lankford ignores the example of his own state if he thinks tax triggers are responsible

  1. Will Rogers said it best:
    “The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellow’s hands.”

  2. I love the above comment by Jo. It reminds me of the hydro-social cycle–an updated version of the hydraulic cycle that includes money. Basically, the idea is that water, like money, flows up the capital hill (Linton, 2014).

  3. Lankford, like Inhofe and other GOPers, will invariably vote the GOP party line, regardless of input from constituents. They do not care about anything but winning and anyone but themselves. Sick of them ALL. Vote BLUE!💙🌀

  4. As heterodox discoveries emerge in every scientific field the Orthodoxy staunchly defends its familiar doctrines and in every field there is about a 20+ window of acceptance as the new Heterodox principles come forward. We are at that stage now in economics. I attended the 1st International Modern Monetary Economics Conference in Kansas City. It was hosted by Dr. Stephanie Kelton, who was Sen. Sanders economic advisor during the Dem. primaries or you may have seen her recent article in the NY Times. I met doctoral economic professionals from Holland, Germany, Italy, Australia, England, the Middle East, & Canada. There were also other heavy hitters there too from the USA like Warren Mosler, author of”THE SEVEN DEADLY INNOCENT FRAUDS OF ECONOMIC POLICY”, & Dr. James Galbraithe who has served Congress in several different capacities & wrote “PREDATOR STATE” & many others. Most of us are economically illiterate & accept what people tell us, assuming the Federal budget to be just like that of an individual, a business or even a state, but even as far back as 1946, way before we got off the Gold Standard in 1971, the NY Federal Reserve Chairman Ruml stated “Taxes to fund Federal Spending are obsolete”. Not until we stopped Pegging our currency to a commodity did economists begin to reevaluate the status & far ranging capabilities of Sovereign Monetary Nations (SMN) with their own inconvertible, free-floating, Fiat Currency & that didn’t begin until the 1990’s! At the macroeconomic level, a SMN is in it’s own univerce, as they are the Currency Issuer & can NOT go broke in that currency. They can’t even reach hyperinflation until we are at total 100% employment & have depleted ALL of our Real Resources. We are Currency Users. It is the Federal Governments job to BALANCE THE ECONOMY, not the budget, since they can’t go broke. A Public Sector Deficit is a Private Sector Surplus. A deficit is an accounting term for when our Neoliberal Corporatist Congress (BOTH parties) spend past their ARBITRARY budget/debt ceiling as they frequently do for the Military/Industrial Complex. Our “Debt” is nothing more than the savings bonds /treasuries at the Federal Reserve which are parked there to collect interest. When they are cashed out we will have to pay them out in US Dollars, not our 1st born children, chicken necks, or any thing else, thus they are ‘inconvertible’ We make them, we don’t get them from China. There is NO debt! Congress needs to be doing their JOB & allocating funds into the States, Territories, & Tribal Governments to INVEST in Infrastructure Renewal, Single Payer Healthcare, Green Energy, forgiving student loans & investing in Free Education. This would create 100’s of 1,000’s of jobs, & bring back Prosperity & the Middle Class!So when you hear ANY politician speaking about deficits or debts, or their Donor-owned, complicit Main Stream Media, KNOW they are either Ignorant or Lying to us & therefore unfit for their job! Demand they spend on the Public Purpose!

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