Republicans promise tax overhaul but still have no plan


Story highlights

  • The bill is still in the drafting process
  • They’ve formed a group dubbed the “Big Six”

But from the view of congressional leaders and their aides, that’s just fine.

The bill is still in the drafting process, and Republican aides say the President is doing exactly what they need him to be doing at this point — using the bully pulpit to go out there and ramp up public support for a tax reform push.

Trump launches tax reform push as details still being worked out

Desperate for a legislative win, Congress and the White House are also painting a picture of a more united front on tax reform than they had on health care. They’ve formed a group dubbed the “Big Six” that includes Trump’s chief economic adviser Gary Cohn, Treasury Secretary Steven Mnuchin, the two leaders of the House and Senate — House Speaker Paul Ryan and Majority Leader Mitch McConnell — and the two chairmen of the tax-writing committees, Rep. Kevin Brady and Sen. Orrin Hatch.

The gang has held meetings for months, and the two committees in the House and Senate have worked on tax reform policies for years.

But if tax reform is anything, it’s not simple. And it’s unclear when exactly the House Ways and Means Committee — which will release the first body of legislative text — will put out the initial draft for committee markup.

House Republicans laid out a blueprint last year, but the White House put out its own one-page proposal back in April. It’s a process that’s further complicated by heavy input from lobbyists and outside groups who have a wide variety of interests in a major overhaul of the tax code.

No unified plan

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The challenge remains that despite controlling the White House and Congress, there’s no unified plan yet laid out for reform even as Trump hits the road to stump for it.

Republicans have been promising tax reform for years but the last significant tax overhaul was 30 years ago — an effort that took more than two years to get through Congress.

White House officials said last month they’d like to see a bill in September, but aides in the House and the Senate are being cautious about committing to any sort of timeline.

Tax reform is just one of many major items on the legislative agenda this fall, with a slate of big debates happening in September alone, like passing a budget and raising the debt ceiling. The devastation wrought from Hurricane Harvey — and the disaster relief funds that will need congressional approval — further busies out the calendar.

Because of the demanding schedule, some are predicting the tax effort will end up as simply temporary tax cuts, which would be an easier lift than a massive overhaul of the tax code and still a popular selling point on the campaign trail next year. Congressional leaders, however, have been bullish that reform will be the final result.

Perhaps the biggest question that remains is how to offset the cost of tax reform.

To pass the bill in the Senate, Republican leaders plan to use a special procedure called budget reconciliation that would allow them to approve the tax changes with a simple majority of 51 votes instead of the 60 often required in the Senate. But to use reconciliation, the bill needs to meet certain requirements, including an assurance the tax overhaul would not increase the deficit after the first 10 years.

Cohn, in an interview with the Financial Times last week, said it will be paid for through a mix of closing certain loopholes and any economic growth that results from tax reform.

Critics, however, say there’s no guarantee that economic growth will be enough, and Democrats are eager to preemptively protect any massive budget cuts to offset any tax cuts.

“Republicans should not use fuzzy math or blatantly partisan estimates to provide the mirage of deficit neutrality,” Senate Minority Leader Chuck Schumer said on a conference call Wednesday with progressive advocates. “It should actually be deficit neutral.”

Getting on the same page

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Both ends of Pennsylvania Avenue also want a lower corporate tax rate. But initially Trump said he wanted to cut it down to 15%, from the current rate of 35%. But lobbyists, members and aides are skeptical the number could get that low because it would significantly increase the deficit.

White House officials have even backed off pushing the 15% number. Asked about the low rate by the Financial Times, Cohn simply said he’d “like to get the tax rate as low as possible so that businesses want to create jobs here.”

The powerful House Freedom Caucus, a group of roughly three dozen House conservatives, is emerging as a decisive force on tax reform, and they, too, are calling for a corporate tax rate that drops into the teens.

The group has threatened to hold up a budget blueprint that would be essential to advancing tax reform if they don’t see a detailed tax reform plan before the budget is on the floor.

Because Republicans are using reconciliation, House Republicans must pass the budget for the fiscal year before they can advance tax reform. As long as the Freedom Caucus digs in, they can stop the process from moving forward all together, since lawmakers are still debating over how to get that budget passed.

Their threat doesn’t come lightly.

The House Freedom Caucus, which remains close to Trump, has already flexed its muscle in the debate. They were essential in getting House leadership to drop its plan to apply a border adjustment tax, which would have helped finance tax reform, but also would have taxed imported consumer goods.

But without a way to pay for the massive overhaul Republicans are grappling with the reality that their goal of getting something on the scope of their initial proposals gets much harder. No one has outlined an alternative that can get both the House, Senate and White House on the same page.

And while Democrats, who are in the minority in both chambers of Congress, have little power to stop the legislative process, they’ll be active in shaping the optics of the tax debate this fall. They’re already mounting a large messaging campaign to protest any tax cuts that disproportionately benefit the wealthy.

Rep. Emanuel Cleaver, D-Missouri, said in the same news conference call as Schumer that Trump’s tax plan is “going to fall right into the laps of the wealthy.”



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