Notice & Comment

Waiting Until January 3 to Sign Tax Reform Would Not Have Delayed a PAYGO Sequestration

In an earlier post, I suggested that Republicans should wait until January 2018 to pass tax reform so that they can delay a Pay-As-You-Go (PAYGO) sequestration.  President Trump appears to have taken this idea to heart and decided that if Congress did not waive the PAYGO sequestration, he would wait until January 3, 2018 to sign tax reform into law.  Although in a Festivus miracle Congress waived the PAYGO sequestration, for future reference I explain here why President Trump could not have delayed a PAYGO sequestration by merely waiting until 2018 to sign tax reform into law.  The plain meaning of PAYGO and prior Office of Management and Budget (OMB) practice indicated that no matter when President Trump signed tax reform, it must still have been included in the 2017 PAYGO annual report, which would have triggered an immediate sequestration.

PAYGO requires that the PAYGO annual “report shall include an up-to-date document containing the PAYGO scorecards.”  The requirement for OMB to publish an up-to-date document means that OMB must include the budgetary impact of all laws that were enacted before publication of the PAYGO report (as compared to at the end of the congressional session).  Therefore, even if President Trump waited until after the 2017 congressional session ends to sign tax reform into law, as long as the PAYGO annual report was published after tax reform became law, tax reform would have needed to be included in the annual report.

This view is consistent with OMB practice.  For instance, during the 2012 session of Congress, Congress passed 43 bills that President Obama did not sign until after the session had adjourned and the next Congress had begun.  Nevertheless, in the 2012 PAYGO Annual Report, OMB included the laws in the PAYGO scorecard.

Additionally, President Trump misunderstood how the government determines during which session a bill is enacted.  I believe that President Trump considered waiting until 12:01 p.m. on January 3rd because that is when the 2018 session of Congress will begin.  He likely thought that by making tax reform a law during the 2018 session, tax reform would be considered enacted by the 2018 Congress.  However, this is contrary to previous practice.  The Government Publishing Office (GPO) records the official list of all laws enacted during a congressional session.  GPO considers a law to be enacted during a session if Congress passed the law during that session.  When the president signed the law is not relevant.  For instance, Congress passed PL 111-137 during the 2011 session of Congress, but Congress waited until mid-January 2012 to officially present the bill to President Obama.  Further, President Obama did not sign the bill until February.  Nonetheless, GPO placed PL 111-137 in the session laws enacted during the 2011 Congress because the 2011 Congress passed the law.

Despite President Trump not having the power to delay a sequestration by waiting to sign PAYGO, he had two gimmicks he could have used to avoid or delay a PAYGO sequestration.  First, as I previously wrote, President Trump could have ignored the Congressional Budget Office’s (CBO) estimate and instead used a Department of Treasury estimate, which claims that the economic growth from tax reform would pay for its costs.  Although PAYGO generally requires OMB to use CBO’s estimate, because the conference report for tax reform did not include a required PAYGO statement, PAYGO allowed OMB to determine the cost of tax reform for PAYGO purposes.  If OMB were to conclude that tax reform did not increase the deficit, PAYGO would not require a sequestration.  Second, OMB could have issued its 2017 PAYGO annual report immediately after the 2017 session of Congress ended, but before President Trump signed tax reform into law.  If tax reform were not yet law, it could not be included in an up-to-date scorecard.

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