On May 4, the Senate Finance Committee held a hearing on budget enforcement mechanisms. Panelists debated the use of budget triggers that would require spending cuts if budget targets were not met, discussed the role of revenues as enforcement mechanisms and reviewed historical use of enforcement mechanisms and their effectiveness in reaching budget targets.
Panelist and former Republican Senator from Texas Phil Gramm discussed budget enforcement measures passed during his time in the Senate. He argued with Committee members that taxes should not be included in such enforcement mechanisms. Mr. Gramm raised the mortgage interest deduction as an example of how the public does not view tax expenditures as spending. Despite this perception, said Mr. Gramm, “it should be looked at and lowered dramatically.”
Paul Van de Water from the Center on Budget and Policy Priorities contended that spending through the tax code is similar to appropriations. He argued that including taxes would provide greater incentive to meet budget targets than triggers that include only cuts to federal services. Since in general, tax expenditures primarily benefit higher income households while spending cuts affect lower income households, Van de Water said he saw no reason why, from an equity perspective, tax expenditures should not be included in budget enforcement mechanisms.