Republicans Sprinting Toward Tax Cuts, Deficits Be Damned

"Everybody stares at the inkblot and sees what they want to see, because we don’t have a bill," one lawmaker said.
Sen.Ted Cruz (R-Texas), Rep. Kevin Brady (R-Texas), House Speaker Paul Ryan (R-Wis.) and Sen. Michael Enzi (R-Wy.) at a press
Sen.Ted Cruz (R-Texas), Rep. Kevin Brady (R-Texas), House Speaker Paul Ryan (R-Wis.) and Sen. Michael Enzi (R-Wy.) at a press event on tax reform on Sept. 27, 2017.

WASHINGTON ― House Republicans are moving closer to adopting the Senate budget this week, a significant step toward the GOP’s ultimate goal of cutting taxes. But Republicans still haven’t settled many of the details in their tax proposal, even as they vote to increase the debt by $1.5 trillion.

The House is tentatively scheduled to vote Thursday on the Senate’s budget proposal, which is needed as a legislative vehicle to carry out tax reform by reconciliation ― a process that allows the Senate to pass a bill by a simple majority.

Yet the tax proposal remains in a paradoxical state: simultaneously written and unwritten. Republicans have a framework, they apparently have legislative text, but they’ve left some major decisions undecided.

“We’ve been writing for the past year on this,” House Ways and Means Committee Chairman Kevin Brady (R-Texas) told HuffPost on Tuesday, while noting that Republicans are still making “adjustments.”

The tax bill clearly has some momentum right now, after the Senate approved its budget and House conservatives agreed to simply take the Senate language instead of trying to conference differences between the House and Senate. (While the House budget was revenue-neutral, the Senate budget allows lawmakers to add $1.5 trillion more in debt ― technically, it recommends that the national debt rise to $26 trillion over the next 10 years.)

One conservative lawmaker told HuffPost that members of the Freedom Caucus cut a deal with leadership, exchanging their votes on the budget to speed up the tax bill’s release by “at least two weeks, possibly three weeks” so it will have a better chance.

Brady told reporters on Tuesday that the plan is for the Ways and Means Committee to release the tax legislation next week, with a committee markup soon to follow.

But as of Wednesday morning, Republican leaders were still whipping votes for the budget, telling members they don’t yet have enough support for this first step.

While leaders haven’t quite gotten desperate, there are some lawmakers who want assurances on the tax bill before they vote for the budget ― and it’s unclear if leadership can really give members those assurances.

The biggest issue right now is the state and local tax, or SALT, deduction. The initial framework for the legislation called for the complete elimination of the write-off, which lets individuals deduct the cost of their state and local taxes from their federal taxes. The Tax Policy Center says the elimination of the SALT deduction would raise $1.3 trillion over 10 years, mostly by charging well-off people from highly taxed areas more.

That hasn’t sat well with a lot of Republicans from states like New Jersey, New York and California. In the Senate, lawmakers took the House-passed budget and adopted an amendment from Sen. Shelley Moore Capito (R-W.V.) that explicitly calls for reductions that “may include” the state and local tax deduction, calling it a write-off that “disproportionately favors high-income individuals.”

Without any deal from leaders that the House tax bill will scale back some of those cuts, Republicans from some states most affected by them are taking a hard-line stance.

“I haven’t seen anything positive at all. They keep saying they’re going to take care of it. Well, the vote is tomorrow,” Rep. Peter King (R-N.Y.) said of eliminating the SALT deduction.

King was one of two New York Republicans to vote against the initial House budget over SALT concerns, and now he’s trying to encourage other members of the delegation and affected states to vote down this budget. “To me, the only way to stop it is to stop the budget. Once that passes, that train is going down the track,” King said Wednesday, adding that there has only been general talk of a fix, but nothing specific.

“Each member has their own interest, and that’s all I’ll say,” King added. “But if we stood together, we could definitely stop this.”

The problem for King is that members from these states are split. Not all districts are affected the same way, and some members want tax reform more than others. Rep. Chris Collins (R-N.Y.) ― the first member to endorse Donald Trump ― told HuffPost on Wednesday that he was voting for the budget regardless. “I’m just being honest. It’s too important for me. I don’t play games,” he said.

Members had a meeting with leadership on Tuesday afternoon, expecting to gain at least some idea of how they’d scale back the cuts, but lawmakers left without a solution. “We’re not there yet,” Rep. Tom MacArthur (R-N.J.) told reporters.

“New Jersey has to be made right, or I can’t support it,” MacArthur said. “I think that’s the issue for those of us that are in the donor states, the states that are subsidizing everyone else. We’re being asked to subsidize even more. Can’t do it.”

MacArthur voted for the initial House budget, but as the tax bill and the elimination of the SALT deduction get realer, his vote now seems somewhat in doubt. 

And this is exactly the situation that may play out with dozens of other members who have plenty of different concerns. It’s easy to theoretically support cutting taxes ― especially when you falsely believe that tax cuts pay for themselves ― but once Republicans see the actual text, things could get dicey. As freshman Rep. Matt Gaetz (R-Fla.) said this week, the tax bill, at this point, is just a “political Rorschach test.”

“Everybody stares at the inkblot and sees what they want to see, because we don’t have a bill,” he said.

Gaetz added that Republicans were making fiscally irresponsible decisions by voting for this Senate budget, potentially financing tax cuts on future generations, and said it was frustrating to be asked to vote for a budget “that nobody believes in so that we have a chance to vote for a tax bill that nobody’s read.”

“You know, I was watching ‘Indiana Jones’ the other night, and I sort of feel like this tax bill is like the ark of the covenant,” Gaetz continued. “It must be so magnificent that if we actually laid our eyes on it, it would eviscerate all of us. It would lay waste to nations.”

The truth appears to be that GOP leaders just don’t want the bill to hang out there for very long before lawmakers vote on it. Republicans do have a number of decisions to make: whether to eliminate the SALT deduction, whether the estate tax will be fully gone, whether businesses can expense the cost of investments to reduce their tax bills, whether and at what rate there will be a fourth top tax rate, the income levels of their tax brackets, how they’ll treat charitable giving, whether there will be changes to 401(k) and other retirement accounts, how they’ll prevent people from gaming the rates just to get the pass-through rate of 25 percent, which corporate loopholes they’re closing, how much the child tax credit will be ― and many, many more issues.

As House Speaker Paul Ryan (R-Wis.) said Wednesday, Republicans are entering “Class V rapids.” And the House vote is just the beginning of the GOP’s problems.

In the House, lawmakers don’t necessarily need to abide by the reconciliation instruction that only allows them to add $1.5 trillion in extra debt. Republicans could kick some of the hardest revenue-raising decisions to the Senate and pass a bill that adds significantly more debt, arguing that they’ll make up the extra money with increased economic growth.

“It’s a matter of faith to them that cutting taxes improves the economy,” the ranking Democrat on the House Budget Committee, Rep. John Yarmuth (D-Ky.) told HuffPost. “But there’s no evidence for that.”

Yarmuth said this budget and the coming tax bill would just show the true priorities of Republicans. “Their real priorities are really not to balance the budget or reduce the debt. They’re to lower taxes on the wealthiest people in the country,” he said.

But that may be the one saving grace for this bill. If Republicans were really interested in a tax reform that reduced debt, it’s difficult to believe they’d agree to a budget that allows them to increase debt ― their argument that increased economic growth will pay for the cuts notwithstanding ― because looking into the history of tax cuts, it’s clear that cuts don’t pay for themselves.

Even as Republicans argue that their tax bill will pay for itself “in spades,” as Rep. Rod Blum (R-Iowa) told HuffPost, they also say there should be a different debt consideration for tax cuts.

“Sadly, it doesn’t seem in this town that people are very concerned about the debt or the deficit anymore. I still care about it,” Blum said. “But first of all, I want people to keep more of their money.”