The Senate is rushing forward with a tax bill that would primarily benefit corporations and the wealthy. Recent changes to the bill will result in middle-class tax increases; virtually everyone will see an increase in their individual income taxes in 2027. But these are not the only negative effects of the bill. Thanks to a little-known law, the Statutory Pay-As-You-Go (PAYGO) Act, the Senate tax bill would automatically result in the complete elimination of many important programs.
Senate leadership has decided not to come close to fully paying for the tax cuts for corporations and the wealthy, which means the bill will cost roughly $1.4 trillion over 10 years. Under the PAYGO Act, this cost will need to be offset by cuts to specific programs beginning in 2018.
The nonpartisan Congressional Budget Office (CBO) recently estimated that a bill that cost $1.5 trillion—roughly the cost of the Senate tax bill—would result in $25 billion in automatic cuts to Medicare in 2018. However, less attention has been paid to the required cuts that will eliminate other important programs entirely. Because of the high cost of the Senate tax bill, and based on the CBO estimates, funding for the following programs, and many more, would be eliminated entirely:
- Farm Price-Support Programs. This program funds the Commodity Credit Corporation Fund, which stabilizes, supports, and protects farm income and prices; helps maintain adequate and balanced supplies of agricultural commodities; and facilitates the distribution of commodities in an orderly way.
- Farm Security and Rural Investment Programs.These programs provide funding for critical conservation efforts on private lands, including critical wetlands, grasslands, forests, and farm and ranch lands.
- Funds for Strengthening Markets, Income, and Supply. This program encourages the exportation of agricultural commodities and products; encourages domestic consumption of agricultural products; and re-establishes farmers’ purchasing power by making payments in connection with the normal production of any agricultural commodity for domestic consumption.
- Commodity Assistance Program. This program provides food donations to help the elderly and low-income populations, among others.
- U.S. Citizen and Immigration Services. The PAYGO sequestration would eliminate mandatory spending for this agency but would not affect discretionary funding for this agency provided on an annual basis.
- U.S. Customs and Border Protection.The PAYGO sequestration would eliminate mandatory spending for this agency but would not affect discretionary funding for this agency provided on an annual basis.
- Vocational Rehabilitation Basic State Grants.This program provides grants to assist states in running statewide vocational rehabilitation programs for people with disabilities in order to help them prepare for, secure, regain, or retain The program is critical to state agencies’ ability to work with disabled individuals to prepare for and engage in competitive and integrated employment and achieve economic self-sufficiency.
- Health Care Fraud and Abuse Control Program. This program combats fraud and abuse in federal health care spending.
- Social Services Block Grant.This funding provides states with flexible resources to help with human services such as child care, foster care, elder abuse prevention, Meals on Wheels, and more.
- Promoting Safe and Stable Families Program. This program helps states keep children safe from maltreatment; prevents the unneeded separation of children from their families; makes the quality of care and service to children and their families better; and helps ensure permanent living situations for foster children.
- Higher Education Programs.This provides funding for historically black colleges and universities, Hispanic-serving institutions, and tribal colleges to better serve students and increase capacity. It also includes grants to help the children of service members who lost their lives in Iraq or Afghanistan to afford college.
- Affordable Housing Program. This program supports federal home loan bank contributions to subsidize affordable housing and homeownership.
- Mineral Leasing and Associated Payments to states. Under this program, states receive 50 percent of federal revenues generated from mineral production occurring on federal lands within that state’s boundaries, except Alaska, which receives 90 percent. The sequestration would eliminate payments to the states; the federal government would retain the revenue.
- Crime Victims Fund. Funding is used to support state programs that benefit crime victims, including efforts to combat violence against women, human trafficking, and child abuse and neglect.
- Western Area Power Administration. This borrowing authority supports constructing, financing, facilitating, planning, operating, maintaining, or studying construction of new or upgraded electric power transmission lines and related facilities.
- Essential Air Service Program. This program supports rural air travel.
Because of the cost of the Senate tax bill in years subsequent to 2018, the sequester would not be a one-time event. The cuts to Medicare and the programs listed above would be repeated in each of the next 10 years; for example, the total cuts to Medicare are estimated to be more than $400 billion over 10 years. Given the broad range of programs and the severity of the cuts, a decade of PAYGO sequestrations would have serious effects on millions of Americans.
Alan Cohen is a senior fellow at the Center for American Progress. Sam Berger is the senior policy adviser at American Progress.