The Republican tax plan is still more talk than action
Reporting from Washington — They have a blueprint and principles. They’ve held countless strategy sessions for what could be the biggest tax overhaul in decades.
They even produced a handy desk calendar with daily inspirational messages and helpful tax statistics to drive home the need for reform.
All Republicans need now is an actual plan.
Despite months of promises and what Senate Majority Leader Mitch McConnell calls a “once-in-a-lifetime opportunity,” the GOP-led Congress and White House have yet to agree on how to revamp the tax code, including how much to reduce corporate and individual tax rates, how tax cuts would be paid for or whether they will be offset at all.
“There is no movement on tax reform,” said Rep. Mark Meadows (R-N.C.), chairman of the conservative House Freedom Caucus, after Republicans huddled recently behind closed doors for the latest update.
“I’m sure they’re working, paddling like a bunch of ducks,” he said. “They just need to make some decisions.”
Next week, Republicans are set to unveil a “consensus document,” which they say will be a much more detailed overview than previous policy papers. But despite some earlier hopes, it is not expected to be an actual plan or bill.
Instead, House Republicans will huddle at a private GOP retreat next week to review the latest offering and consider next steps as Congress tries to pass a bill by the end of the year.
But blueprints and drafts are far from legislation. A key problem for Republicans remains the division within their majority between fiscal hawks who insist that any tax cut not add to the deficit and those who are willing to risk ballooning the debt in hopes that it will spur enough economic growth to cover the price tag.
Key Senate Republicans, Sen. Bob Corker (R-Tenn.) and Sen. Pat Toomey (R-Pa.), announced this week a deal to proceed with a package that would add an estimated $1.5 trillion to the deficit, an extraordinary pivot for a party that has prided itself on fiscal conservatism.
But officials said Thursday that figure remains in flux. And their accord is no guarantee of broader support for the final tax bill.
“This is really the heart and soul of who the Republican Party is,” said Maya MacGuineas, president of Committee for a Responsible Federal Budget, a nonpartisan fiscal watchdog group.
“Republicans have been fighting to have control of the House, the Senate and the White House to make some improvements to the fiscal situation, and they are on track to do absolutely the opposite,” she said.
Trump is another wild card. Cutting the deficit or debt was never one of his top priorities. And restless with the Republican logjam in Congress, Trump has signaled a willingness to court the minority party for a fresh approach, as he did recently with House Minority Leader Nancy Pelosi and Senate Minority Leader Charles E. Schumer to reach deals on immigration and the debt ceiling.
Though earlier GOP tax proposals would have benefited mostly corporations and the rich, Trump more recently has said his focus will be on the middle class.
“The wealthiest Americans are not my priority,” Trump said recently. “My priority are people in the middle class, and that’s where we’re giving the big tax reduction to.”
Overhauling the tax code is no easy task, and the last time Congress was able to accomplish a big tax deal was in 1986, an effort so difficult and complicated entire books have been written about it.
Republicans are determined, even desperate, to fulfill their campaign pledge on tax reform.
“The stakes are higher than ever that we deliver,” Rep. Kevin Brady (R-Texas), the chairman of the House Ways and Means committee, told GOP colleagues during a private meeting last week.
Trump has made clear his preference for a massive corporate tax cut — dropping the rate from 35% to 15% — which is even too low for some of the most conservative Republicans who worry it would pile on to the nation’s debt. House Speaker Paul D. Ryan has aimed closer to a 20% rate.
Republicans also want to consolidate individual rates into fewer brackets, and Trump — in what many saw as a nod to Democrats — said recently that the wealthiest Americans may actually have to pay more.
But how to pay for everything remains the problem.
Initially, Ryan had proposed the so-called border-adjustment tax on foreign-made goods, potentially providing a windfall of $1 trillion in new revenue that could offset sweeping cuts.
But that idea was abandoned by the White House after fierce opposition from groups aligned with the powerful Koch brothers and other businesses groups.
That left Republicans scrambling to agree on an assortment of deductions to offset some of the costs, aiming particularly at Democratic-leaning states with proposals to cap mortgage interest deductions for loans above $500,000, for example, which would particularly hit expensive real estate markets in California and New York.
They also have discussed limiting the ability to write off state income taxes, which also would hit hardest in high-cost, liberal-leaning states.
But such steps would not be enough to pay for everything, piling onto deficits. Roughly speaking, every percentage-point reduction in the corporate tax rate costs about $100 billion over a decade, putting the price tag for Trump’s 15% corporate rate at about $2 trillion.
Pelosi derides the GOP reliance on hoped-for growth to cover tax cuts as a “warmed over stew” of trickle-down economics that does little to help lower- and middle-income working Americans and their families.
“To take corporate America down to 15 is like, what are we talking about here?” Pelosi said.
She encouraged the White House and its Republican allies in Congress to do a better job studying the budget — “it’s like your irregular verbs,” she said — to better understand what is at stake if they eliminate so much tax revenue.
“He wants America to be No. 1. You can’t be No. 1 if you’re not investing in education, science and technology and all the things our budget is committed to doing.”
Republicans are under great pressure from their allies in the business community to make progress on their plan, which is being crafted under special budget rules that allow for simple majority passage, bypassing a Senate filibuster that would otherwise require 60 votes.
“If you have the White House and you have both sides of Congress, and you can’t get tax reform done, it is an indictment of them, and I would say business leadership as well,” Randall Stephenson, chief executive of AT&T Inc., said at a forum hosted by the Business Roundtable, a trade association of CEOs of the largest U.S. corporations.
But if Republicans are unable to create consensus among themselves, Trump may be inclined to try again with Democrats.
One centrist Republican, Rep. Tom Reed of New York, was among a dozen lawmakers from both parties who met with Trump recently at the White House to discuss ideas going forward.
“At the end of the day, there’s a clear indication that, look, we’ve tried to go one way,” Reed said. “It hasn’t worked. They’re not going to be beholden to that way any longer. They’re open to getting things done.”
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