Center for American Progress

RELEASE: CAP Brief Examines How PAYGO Rules Could Help Stop Deficit-Financed Tax Cuts for the Rich
Press Release

RELEASE: CAP Brief Examines How PAYGO Rules Could Help Stop Deficit-Financed Tax Cuts for the Rich

Washington, D.C. — With congressional Republicans likely to use budget reconciliation to pass tax legislation with a simple majority in the Senate, a new issue brief from the Center for American Progress outlines how pay-as-you-go rules—known as PAYGO rules—provide opportunities for defeating or jeopardizing tax cuts for the wealthy that are totally or partially unpaid for. The House and Senate return next week after the August work period, and Congress may debate a fiscal year 2018 budget resolution in September, which could pave the way for deficit-financed tax cuts.

“The reconciliation process gives the congressional majority an opportunity to pass huge tax cuts for the rich without bipartisan support. But an automatic sequester of some mandatory spending programs that would result from statutory PAYGO could provide leverage to stop unpaid-for tax cuts before they are enacted,” said Alan Cohen, CAP senior fellow and author of the issue brief. “Opponents of enormous tax cuts for the wealthy would be sure to highlight that a vote for unpaid-for tax cuts would also be a vote for harmful spending cuts that would eliminate many important programs.”

As CAP’s brief explains, there are two types of PAYGO rules: statutory and Senate. Statutory PAYGO calls for the creation of a “PAYGO scorecard:” at the end of each year, the Office of Management and Budget (OMB) adds together all the cost and savings entries for that year. If the net total for that year is deficit-increasing, then the OMB is required to implement an across-the-board sequester of certain mandatory programs to make up for that cost. While many mandatory programs are exempt from this sequester, some are not, including: farm price-support programs, Medicare payments to providers and prescription drug plans, Vocational Rehabilitation Basic State Grants, mineral leasing payments to states, the Social Services Block Grant, concurrent receipt accrual payments to the Military Retirement Trust Fund, and others. A very sizable tax cut, for instance, would completely zero out farm price-support programs—a politically untenable position for many members of Congress and senators.

Under Senate PAYGO, on the other hand, legislation that increases the deficit over the next 6 years or 11 years—such as a deficit-increasing tax cut—is subject to a point of order that can only be waived with 60 votes. Senate PAYGO could be repealed in the budget resolution, or the unpaid-for legislation could be exempted from the PAYGO process by the budget resolution—as was done for legislation to repeal the Affordable Care Act. As CAP’s brief notes, however, voting for repeal or exemption could be difficult for the many senators in the majority party who voted in 2015 to make Senate PAYGO permanent.

Click here to read “The Potential Impact of PAYGO Rules on Tax Legislation” by Alan Cohen.

For more information on this topic or to speak with an expert, contact Allison Preiss at or 202.478.6331.