House Republicans’ decision Tuesday to delay the release of their tax overhaul legislation by at least a day was the first stumble in a carefully choreographed drive to get a bill to President Donald Trump’s desk by the end of the year.
Whether it’s just a temporary setback or a sign of trouble ahead remains to be seen. But the path to victory on the biggest issue remaining on Trump’s agenda this year is littered with obstacles and traps — all laid by members of the Republican Party. House Republicans are caught between the urge to cut taxes while avoiding ideas that could cause a revolt in their own party or hurt middle class taxpayers.
Here are the six ways Republicans could derail their own tax plan:
$4 trillion budget hole: The Republican budget allows them to cut taxes by $1.5 trillion, which sounds like a lot — except compared to all the promises they’ve made. Their plans to cut taxes on businesses and individuals would cost some $5.5 trillion, according to the nonpartisan Tax Policy Center.
That means they have to find $4 trillion in offsetting savings to fit their tax plan into the budget. That’s more in tax increases and other savings than Congress has approved in the past quarter-century combined.
Many lawmakers have no idea about the scope of changes that will be required to meet their budget numbers, and it is an open question whether Republicans can agree to take trillions with one hand while handing out trillions with the other. They’ve offered some indications where they’d find the money, but they haven’t gone over well.
401(k) changes: One of the possible revenue raisers has ignited a feud among Republicans. House Ways and Means Chairman Kevin Brady (R-Texas) wants to sharply lower the cap for pre-tax contributions to 401(k) savings plans and steering contributions beyond that into plans that would tax the money upfront, rather than when it is withdrawn.
Even some of Brady’s fellow tax writers are nervous about the idea because they worry that requiring people to pay taxes upfront on their savings will feel like a tax increase. What’s more, they fear it will mean people will save less because, while 401(k)s are widely known, those tax-me-now savings vehicles — known as Roth accounts — aren’t nearly as popular.
Despite a tweet from Trump last week promising, “There will be NO change to your 401(k)” — and a subsequent phone call to Brady — the House’s chief tax writer has been reluctant to drop his plans because it would generate a lot of savings he needs to make the math behind his tax plans work.
State and local tax problems: Another idea that has spawned intra-party squabbling is Republican leaders’ desire to end a century-old deduction for the state and local taxes people pay, which would bring in an estimated $1.3 trillion in new tax revenue over a decade, making it one of the biggest pay-fors in the Republican plan. But GOP members from high-tax states such as New York and New Jersey are rebelling over the idea, complaining their constituents are being asked to pay higher taxes so people elsewhere can get a tax cut.
The lawmakers have floated several compromises, including capping the deduction for high-income earners and allowing people to continue to deduct their property taxes. They’ve also brought in the big guns with Vice President Mike Pence, Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn and other top administration officials conferring with unhappy lawmakers. But it’s not clear the proposed changes are enough to win over blue-state Republicans who could block the legislation.
Trump interference: Republicans have longed for presidential leadership on taxes, but, if anything, Trump is making things harder. He confirmed many Republicans’ fears when he abruptly shot down any 401(k) changes. Earlier this year, he stunned many Republicans when he called a House-passed Obamacare repeal plan “mean,” raising fears among lawmakers they might embrace controversial ideas as part of their tax-write plans only to see them trashed by Trump.
What Republicans ideally want from a president is help fighting special interests, by explaining to the public how difficult trade-offs are the price of tax reform. But Sen. Bob Corker surely spoke for many Republicans when he said last week that he’d be happy if Trump just butted out of the tax debate.
“What I hope is going to happen is the president will leave this effort, if you will, to the tax-writing committees, let them do their work and not begin taking things off the debate that ought to be debated in these committees,” he told ABC’s “Good Morning America.”
Senate filibuster: The so-called Big Six tax framework released in August was designed to get Republicans on the same page when it comes to rewriting the tax code, though it hasn’t quite worked out like that. The House and Senate appear to be going in their own separate directions on issues ranging from specific tax policies like whether to kill the estate tax to how much a plan ought to cost.
Senators expect to be consulted — not handed down a pre-cooked proposal — and they don’t fear Trump’s wrath like many House Republicans. It doesn’t help that Trump is feuding with two of the chamber’s most independent-minded members, Corker and Sen. John McCain (R-Ariz.).
Many fear a repeat of the Obamacare repeal debacle when the House strained to pass a plan only to watch it die as senators tried, and failed, to come up with an alternative. Asked earlier this month about the biggest impediment to tax reform, House Speaker Paul Ryan said: “You ever heard of the United States Senate before?”
Unrealistic deadlines: Republicans say they intend to finish up with taxes by the end of this year. But the delayed release of the GOP tax bill this week shows just how hard that will be. What’s more, the Senate is planning to release its own tax-reform plan next Wednesday, which is expected to differ from the House proposal on a host of fronts. Further complicating matters: Lawmakers are simultaneously punting a growing number of other contentious issues into December.
They’ll have to agree on federal spending in order to keep the government open beyond Dec. 8. Many lawmakers also want to address the so-called DREAMers, some 700,000 undocumented immigrants threatened with deportation under a White House order issued last month. Then, earlier this month, Trump cut off Affordable Care Act subsidies to insurance companies, which lawmakers are scrambling to address amid worries it could lead to soaring premiums.
All of those are combustible issues, and would come as lawmakers try to digest a tax plan likely to run more than 1,000 pages. Some fear it could lead to another showdown over shuttering the government — blowing taxes off the radar.
Republicans have begun acknowledging the calendar may slip when it comes to taxes, with Treasury Secretary Steven Mnuchin saying last week that it would be “extraordinary” if lawmakers can wrap up that work by the end of the year.
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