¦The long-awaited proposal released Wednesday morning by the so-called Big Six is heavy on the GOP’s tax cut desires and light when it comes to explaining whose taxes will have to go up to help control costs.
After months of meeting behind closed doors, the Trump administration and the Republican leadership in both chambers of Congress announced they had agreed on a litany of proposed tax cuts: reducing the corporate rate to 20 percent from the current 35 percent; slashing taxes on unincorporated businesses to 25 percent; nearly doubling the standard deduction; expanding a tax credit for having children; and creating a special low rate on multinational companies’ overseas earnings, among other changes.
Before leaving for Indiana, Trump called the proposed 20 percent corporate rate “very much a red line.”
“I’m not negotiating that number,” he told reporters. “I wanted 15, so we got 20 — 20 is my number.”
The cost of the entire plan would run in the trillions, with the nonpartisan Committee for a Responsible Federal Budget putting the price tag at roughly $2.2 trillion.
But Republican leaders don’t plan to simply cut taxes and leave it at that. They want to at least partially defray the cost with offsetting tax increases. But their plans for doing that, for the most part, are still a secret.
That didn’t stand in the way of a crucial endorsement from the hard-line conservative House Freedom Caucus, even though some of its leaders had warned they wanted to see plenty of details. House Republicans presented a unified front for the plan at a retreat aimed at rallying their often-divided conference behind the new tax push.
It’s not that Republicans don’t necessarily know who they want to foot the bill for their plans. They just don’t want to identify all the losers quite yet. Their game plan is to delay spelling out who would have to pay more under their plan in order to give opponents as little opportunity as possible to mount a counteroffensive.
There’s a fear that K Street lobbyists will launch massive campaigns to protect their favorite provisions, killing the entire initiative. Speaker Paul Ryan urged lawmakers to stand firm against lobbyists during the GOP retreat.
“Ten thousand lobbyists are heading to your office right now,” he said. “They’re going to try to get you to carry their water.”
The plan was only hours old when the National Association of Realtors blasted it for repealing a deduction for state and local taxes while accusing the GOP of plotting a “backdoor” repeal of the mortgage interest deduction for millions of homeowners.
The group is concerned that doubling the standard deduction would mean that far fewer Americans would bother taking itemized deductions like the mortgage interest deduction. That, in turn, could lead to a decline in home values, it said Wednesday in a statement.
“Plummeting home values are a poor housewarming gift for recent homebuyers and a tremendous blow to older Americans who depend on their home to provide a nest egg for retirement,” said NAR President William Brown. “Tax reform — a worthy endeavor — should first do no harm to homeowners. The tax framework released by the Big Six today missed that goal.”
The Big Six includes Ryan, House Ways and Means Chairman Kevin Brady, Senate Majority Leader Mitch McConnell, Senate Finance Chairman Orrin Hatch, National Economic Council Director Gary Cohn and Treasury Secretary Steven Mnuchin.
Besides ending the state and local tax deduction, Republicans have offered a few other indications of where they intend to find savings, such as paring a break for business interest payments. But they’ve been vague on many of the details, and they’ll need much more than that to fit within their budget.
That gave Democrats an opening to attack the plan as a budget buster.
Senate Minority Leader Chuck Schumer complained the additional debt the plan would generate would increase pressure on lawmakers to cut spending on entitlement programs. He said “any tax reform plan should be fiscally responsible so as not to put important programs like Medicare at risk.”
“It seems that President Trump and Republicans have designed their plan to be cheered in the country clubs and the corporate boardrooms,” he said. “Repealing the estate tax? How does that help middle-class people?”
The trick for Republican leaders is providing enough detail to satisfy GOP lawmakers whose votes they’ll need — and enough specifics to make their plan appear credible — but not so much that they get eaten alive by lobbyists.
Rank-and-file House Republicans didn’t seem bothered by the lack of details, welcoming a blueprint they hope will be the basis of a much-needed legislative victory to take into the 2018 election. Ryan, House Majority Leader Kevin McCarthy (R-Calif.) and Conference Chairwoman Cathy McMorris Rodgers (R-Wash.) kicked off the five-hour retreat, packed with breakout sessions and capped with a keynote address by Vice President Mike Pence.
Members were jubilant — even conservatives who rarely see eye-to-eye with GOP leaders.
The House Freedom Caucus, which had been blocking the GOP budget until they received more tax details, not only let go of that hold but fully backed the tax framework — a huge coup for Ryan.
“I like what I see,” said Rep. Dave Brat (R-Va.), a Freedom Caucus member.
Another group member, freshman Rep. Warren Davidson (R-Ohio), said the session was the “best and most collaborative session in one year here.”
Republicans don’t know exactly how many offsets they’ll need exactly, because they haven’t agreed on how much their plan ultimately would cost. Senate Republicans are working on a budget that would allow a total of $1.5 trillion in tax cuts, while a competing fiscal plan in the House calls for deficit neutrality.
Also, members of the Big Six have been divided over how deeply to go after the business interest deduction and other breaks, and the House and Senate are likely to go separate ways on many pay-fors.
Brady said he won’t release the legislative text of his plan, spelling out how it would work, until after Republicans have a budget in place. Some don’t expect Republicans to release those details until shortly before the tax committee formally takes up a plan — next month at the earliest.
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