Republicans Begin To Bet It All On Long-Shot Tax Reform

“It could be a part of a bigger picture. It could be meaningless,” one GOP congressman says.

WASHINGTON ― Nine months into Donald Trump’s presidency, Republicans have little to show for their unified control of government. An Obamacare repeal looks unlikely. Trump’s border wall has been stymied. And spending deals have benefited Democrats more than they have the GOP.

But Republicans are betting they can quickly turn around their legislative misfortunes with tax reform, the ever-elusive GOP promise to lower rates and ignite the economy.

The problem is there are broad disagreements on what an overhaul should look like: what rates should be, who should benefit, whether tax cuts should be paid for, and how long any cuts should last.

Despite all the unanswered questions, House Speaker Paul Ryan (R-Wis.) suggested Wednesday that he still believes Congress can get tax reform done by the end of the year, and Republicans are betting that the way forward is to just press ahead and ignore the obvious and unsettled disagreements.

Ways and Means Chairman Kevin Brady (R-Texas) told the House GOP conference on Wednesday that Republicans will release a “consensus” tax document in two weeks ― one worked out among his committee, Senate Finance and the White House.

Exactly what will be included in that document is unknown. When HuffPost asked Brady on Wednesday if the proposal would include the various tax rates for reform, Brady said they were “still hammering out the details.”

While it’s hard to imagine the document wouldn’t include rates ― or at least some range of rates that can be tweaked ― it’s a less than fantastic sign for proponents of reform that Brady’s answer is not some version of “Of course!”

Perhaps nothing is more emblematic of the cheery-in-theory, tortured-in-reality approach that Republicans have taken for tax reform than the budget.

Neither the House nor the Senate has agreed to a budget document for tax reform, which would be the first step for approving an overhaul through reconciliation, a process that allows passage on a simple majority vote. But lawmakers are undeterred by that procedural issue, with Brady telling HuffPost on Wednesday that he expects the House to adopt a budget in October, once the Republicans who have been holding up the budget see some tax reform details.

That’s a nice theory, but it’s also an easy leverage point for any member who doesn’t like whatever Republicans put forward on a tax overhaul: just withhold his or her vote in exchange for some carve-out or change, which could in turn affect another member’s vote.

It’s not that Republicans are torn on what to do. Excluding the ill-fated border adjustment tax on imports that found significant opposition in Congress, leaders have generally had an idea of what reform would look like. The issue is that once Republicans reveal their document, there will be winners and losers.

Charities may lose if lawmakers, as expected, double the standard deduction, disincentivizing itemized deductions and the charitable giving it encourages. Real estate investors, particularly ones who use so-called property swaps to defer paying taxes on their gains, could also be big losers, as could upper- and middle-class earners in high-tax states like New York and California if reform eliminates the federal deduction for state and local income taxes.

Lawmakers who have been working on the proposal say the difficulty isn’t coming up with their ideas.

“We have a full bill. That’s not a problem,” senior Ways and Means member Devin Nunes (R-Calif.) said, according to The Wall Street Journal. “Showing it is the challenge.”

Once Republicans release this document laying out the broad strokes of reform, lawmakers and interest groups will be able to attack from all sides. Conservatives may say the tax cuts aren’t ambitious enough. More moderate members ― somewhat ironically, by more traditional standards of fiscal restraint ― may have problems with how much the overhaul will increase the deficit. (Conservatives don’t seem to have a problem adding more money to the deficit, as long as it’s for tax cuts.) And individual loopholes, either the closing of them or their continued existence, will almost certainly draw opposition from even the most normally amenable lawmakers.

And these problems are even more stark in the Senate, where any three Republicans could derail the effort, assuming all Democrats vote against the overhaul.

Trump has begun seeking out individual Democrats to potentially vote for tax reform. His effort may be more fruitful than health care, where Democratic Senators had little problem voting against a Republican proposal that would have largely hurt their constituents.

With tax reform, it’s future generations who may be more opposed to a short-term economic sugar high that increases the debt, not the current voters in, say, West Virginia or North Dakota.

But that assumes Republicans can get much further into this process than where lawmakers currently stand. Paul Ryan said Wednesday he thought accomplishing tax reform would be the reason Republicans keep their majorities, but even lawmakers seemed to think that was an overblown, over-simplified rationale. 

House Speaker Paul Ryan (R-Wis.), at a news briefing on the GOP agenda at the Capitol on Wednesday, says tax reform will be t
House Speaker Paul Ryan (R-Wis.), at a news briefing on the GOP agenda at the Capitol on Wednesday, says tax reform will be the reason Republicans will keep their majorities.

Natural Resources Chairman Rob Bishop (R-Utah) told HuffPost that if Republicans didn’t get tax reform done, the Earth wouldn’t “quit spinning on its axis” and Republicans may not lose the majority.

“I don’t know that it’s necessarily an accurate correlation,” Bishop said. “It could be a part of a bigger picture. It could be meaningless.”

Bishop felt like Republicans would get tax reform done, but he did suggest the Senate could be a roadblock

“Can you find 50 lucid members in the Senate?” Bishop asked.