The Pitfalls House Conservatives Worry Will Sink Tax Reform
Concerns mount that cuts for middle class, corporations could languish in the McConnell-run Senate
House Republicans are fretting that the next big priority item for the GOP could again face peril in the Senate.
The Senate bungled the repeal of Obamacare not just once, but twice, at the end of July and September. Now arrives the biggest legislative promise yet in terms of economic impact.
“In the back of the mind of every House member is a concern that even if they pass tax reform, [Mitch] McConnell won’t be able to deliver in the Senate,” a senior congressional aide for a top Republican House member told LifeZette. “He had trouble on Obamacare with only one-sixth of the economy. Now imagine an issue that deals with 100 percent of the economy, and literally every lobbyist has something to say.”
Trump wants to consolidate the personal income rates into three brackets; cut the corporate rate to 20 percent, from 35 percent; give small businesses a substantial tax cut; and expand the family tax credits.
Complicating the political issue is the recent retirement of Sen. Bob Corker (R-Tenn.). Corker is an ally of the president, but recently has been sounding a more independent note. Without a worrisome 2018 election ahead of him, Corker is now saying the tax reform package has to be “revenue neutral” and cannot add to the national debt.
“If it looks like to me, Chuck, we’re adding one penny to the deficit, I am not going to be for it, OK?” Corker said recently to Chuck Todd of NBC News. “I’m sorry. [National debt] is the greatest threat to our nation.”
That tune sounds all too familiar to Eddie Zipperer, an assistant professor of political science at Georgia Military College.
“Already, Bob Corker is poised to be the hero who kills tax reform if it isn’t a ‘revenue-neutral’ plan,” said Zipperer. “GOP senators love to be the maverick who stands up to defeat decent legislation and leave Americans to live under the abysmal status quo. There will be two or three who want to get those phony ‘standing-up-to-the-GOP’ left-wing media headlines.”
The biggest hurdle will be the deficit hawks, said Zipperer, aided by a Congressional Budget Office that will scoff at tax cuts stimulating growth. Growth can add new revenue even if rates drop, many Republicans believe.
“I see the CBO severely underestimating the economic growth that will be spurred by lowering the corporate tax rate,” said Zipperer. “They’ll assume almost no economic growth, which is wrong. Why would a big corporation build a factory in Ohio, Pennsylvania, or Indiana, and pay a 35 percent [corporate] tax rate when they can build that factory in Ireland and pay 12.5 percent? By the way, since instituting the ultra-low rate, Irish economic growth has been outstanding — best in the Eurozone four years in a row.”
Some conservative pundits believe the GOP senators love to pose and preen for the cameras, such as Corker’s granting an interview to the famously liberally biased Todd. A chance to help kill tax reform will help them stroke their egos, with the help of the predominantly liberal media.
And the fact that the Republican Party only has 52 of 100 seats in the Senate makes the room for error excruciatingly tight.
“The Trump administration’s much-needed tax-reform proposal faces challenges from anti-Trump Republicans such as Sens. Susan Collins (Maine), Lisa Murkowski (Alaska), and John McCain (Ariz.), who vote like they’re part of the ‘pussy hat’ ‘resist’ movement,” said Adriana Cohen, a columnist for the Boston Herald. “[They] oppose the elimination of state-and-local-tax deduction, (like) a potpourri of lobbyists protecting their pork.”
The deduction for state and local taxes is the first snag hit by the tax reform proposed by Trump, House Speaker Paul Ryan (R-Wis.), and Senate Majority Leader Mitch McConnell (R-Ky.).
No less a conservative Republican senator than Orrin Hatch of Utah said he had problems with eliminating the deduction, which allows taxpayers to write off their state and local taxes. The deduction is a boon to high-tax states such as California and New York, where the federal deduction distorts the true cost of the state budgets. The deduction has also been described as unfair to states such as Florida and Texas that have no income tax.
“Trump will get a ferocious fight from the California delegation because the tax deduction for state and local takes some — though hardly all — of the sting out of California’s exorbitantly high tax rate,” said Robert Kaufman, a professor of public policy at Pepperdine University in California.
But policy aside, the Democrats will be wooing the Senate’s moderate Republicans to vote against tax reform for the simple hope of hurting Trump.
“The Democrats are less likely than usual to consider tax reforms on the merits because they hope to administer Trump another defeat, energized by the failure to pass health care,” said Kaufman.
But not everyone believes the Republican Senate will fail. McConnell was able to get the nomination of Supreme Court Justice Neil Gorsuch through the Senate, even eliminating the filibuster rule for Supreme Court nominees.
“Passage of tax reform is not guaranteed,” said Matt Mackowiak, a GOP consultant and chairman of the Travis County Republican Party in Texas. “The House Freedom Caucus could sink the bill. As few as three Republican senators can sink the bill. I do expect the House and Senate to pass different bills. Ultimately, tax reform unifies Republicans in a way health care reform didn’t. The failure of health care reform makes passing tax reform more likely. Republicans are desperate for a major policy victory, and I expect they will get one.
(photo credit, homepage and article images: Gage Skidmore, Flickr)