GOP lawmakers are racing toward a July 4 deadline to pass a sweeping $5.3 trillion tax bill, also known as the "megabill," but questions remain about whether revenue from President Trump's tariffs can pay for those tax cuts. Bloomberg Intelligence senior policy analyst Nathan Dean joins Catalysts to discuss the bill, its main goals, and how tariffs factor in.
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I want to talk about this July 4th deadline. That is the GOP's new target for the mega bill, according to Treasury Secretary Scott Beson. To what extent does that mean that we will get clarity on tariff policy between now and July 4th, given the idea that the revenue from tariffs could potentially be a way to pay for all those tax cuts in that July 4th bill?
So, I don't think you're going to see much in the way of clarity on the tariff argument because there are almost two separate issues. Obviously, President Trump loves to say that he's going to use tariffs to pay for this tax reform, but Congress isn't exactly thinking about that. Now, this is a $5.3 trillion bill. The bulk of it goes to extending the 2017 tax cuts and Jobs Act, but there's about $1.5 trillion in additional, like President Trump was saying, no taxes on tips, no taxes on Social Security. But the question that we have from the investment point of view is, yes, you have these tariffs going on, but what else do you have to cut to help pay for that? And that's primarily coming from Medicaid, SNAP benefits, and the Inflation Reduction Act. So, even though President Trump can say that he's going to use tariffs to help pay for tax reform, we still don't know the true extent of what these quote-unquote deals or these memorandums of understandings that are occurring between the negotiators between the United States and these other countries. So, Congress isn't exactly thinking about this tariff argument, but if this bill does come in sooner rather than later, I think you could see the White House potentially say, "Let's take a step back on tariff policy because the tax cuts are going to help generate economic growth."
Yeah, and I hear you separating out these different policies between tariffs and tax cuts, but then when we hear members of the administration talking about how tariffs are a revenue raiser as part of the way to pay for tax cuts, it's hard to not feel like they are lumped together. Talk to me about whether or not the need to use tariffs to raise revenue negates the idea that we may have tariff negotiations that make the tariffs less severe because the tariffs are a necessary revenue raiser.
Yeah, so you know, if you talk to the folks up in Capitol Hill, there's really no indication of how much they think is going to come in for your tariffs. You know, the, you know, the economic lab up at Yale is estimating it's only collected around $2.4 billion, so that's billion with a B, and you're talking about a bill that's going to cost $5.3 trillion. But, you know, tariffs are not going into the reconciliation record, meaning tariffs are not being put in how you're going to pay for this bill. What the White House is saying is, look, we understand that you will have to pass this $5.3 trillion bill. Think of the tariffs coming from outside of this arrangement as helping to pay for that, and it certainly is going to give comfort to some of those Republicans that will ultimately vote for this because one of our core scenarios is that when this passes, and we do think it can pass by the July timeframe, maybe not Fourth of July, but definitely before the August recess, when this passes, we think that the deficit is going to increase substantially as a result of this because we just don't see the payfors coming through the rest of the package actually getting the votes to pass the House or the Senate.
