Democratic Election Sweep May Complicate GOP Push For Tax Reform

Some Republicans might think twice before voting to raise middle-class taxes.

WASHINGTON ― If you’re a vulnerable Republican lawmaker from a high-tax state like New York, New Jersey, or California, Tuesday’s stunning Democratic sweep in key state and local elections may give you some pause.

Passing a tax reform bill that analysts say raises taxes on some middle-class Americans was already a politically risky move, but the task may prove even more difficult given the Democrats’ big wins in Virginia, New Jersey, and Washington state.

Senate Minority Leader Chuck Schumer (D-N.Y.) was quick to make the connection for Republicans in a Senate floor speech on Wednesday.

“If you think the results [in Tuesday’s elections] were terrible for you, wait till you pass a bill that raises taxes on middle-class families in your district,” he said.

Many Republicans were equally quick to dispute that characterization, insisting they had more reason now to pass their tax bill.

“If anything, this just puts more pressure on us to follow through,” House Speaker Paul Ryan (R-Wis.) said at a Wednesday event on tax reform hosted by The Washington Examiner. “It simply means we’ve gotta deliver.”

Republican strategist Doug Heye agreed, saying the GOP needs a legislative victory its candidates can tout ahead of the 2018 congressional midterm elections.

“Voters still want to see Washington do something, and Republican primary voters especially want to see Congress move something that is a legislative priority,” he said.

While conceding that “the Democratic sweep, especially down ballot, doesn’t bode well for Republicans,” he argued that “a direct correlation” between Tuesday’s results and the fate of the tax bill “is tenuous at best.”

The legislation House Republicans are marking up this week includes drastic cuts to the corporate tax rate, as well as cuts to small business and individual income taxes. In order to offset the large amount of revenue lost with those cuts, Republicans propose eliminating several popular deductions, including the one for most state and local taxes.

Some GOP lawmakers from high-tax states like New Jersey and California have  balked at eliminating the popular deduction over fears the bill would raise taxes on their middle-class constituents ― and spark a voter backlash against the GOP.

The bill in its current form “clearly raises taxes on some people, including in my state,” Rep. Darrell Issa, rated by analysts as a vulnerable California Republican in next year’s elections, said on Tuesday.

In order to ameliorate those concerns, the measure’s latest draft includes a compromise that allows taxpayers to continue to deduct up to $10,000 in personal property taxes. The provision was welcomed by centrist GOP lawmakers like Rep. Tom MacArthur (N.J.), who told HuffPost on Wednesday that the election result didn’t affect his thinking on the tax bill at all.

Rep. Peter King (R-N.Y.), on the other hand, said lawmakers ought to take Democrats’ gains into consideration.

He questioned “this attitude of, ‘We have to get tax cuts to get the voters with us.’” A tax cut “which is going to raise taxes on your constituents ― it makes no sense,” King told HuffPost.

“I think a lot of them are in silos,” King said of his GOP colleagues. “The echo chamber.”

Senate Republicans, in their version of a tax bill to be unveiled soon, are said to be considering eliminating entirely the state and local tax deduction, including for property taxes.

Some Republicans are expressing concern about the political fallout in the midterms of the GOP proposals on state and local taxes.

“Republicans defending RAISING TAXES on middle-class taxpayers already paying high state/local taxes display an arrogance that will cost us the majority in Congress faster than you can say ‘Speaker [Nancy] Pelosi,’” Ron Nehring, who headed the presidential campaign in California for Sen. Ted Cruz (R-Texas) last year, tweeted on Tuesday, referring to the leader of House Democrats.

Cruz may present problems for GOP leaders on tax reform. On Tuesday, he called raising taxes on middle-class households in high-tax, heavily Democratic states like New York and California “a mistake.” The senator also called for repealing Obamacare’s individual mandate, which assesses penalties on taxpayers who do not purchase health insurance, in order to help pay for the tax bill.

Injecting Obamacare, which Republicans failed to repeal earlier this summer, into the tax debate would open a whole host of other problems in the Senate. Ways and Means Committee Chair Rep. Kevin Brady (R-Texas), the chief tax writer in the House, said it was still up for discussion. But he did not include a provision in the House tax bill to do so.

More broadly, Republicans face a Goldilocks problem on tax reform that also stymied their efforts to repeal Obamacare.

Winning enough GOP House votes for tax reform spurred the compromise on the property tax deduction. In order to win over enough GOP votes in the Senate, however, they must eliminate enough deductions to clear that chamber’s budget restrictions, which only allow for an increase to the deficit by $1.5 trillion over a decade. The Congressional Budget Office estimated on Wednesday the House the House bill would add $1.7 trillion to the deficit over that period.

“They’re in a difficult dynamic,” Schumer told reporters. “To get the bill to pass in the House, you make it difficult to pass in the Senate.”

Matt Fuller and Arthur Delaney contributed reporting. This article has been updated with comments from King and more perspective on obstacles Republicans face to passing a tax reform bill.