Republicans on Capitol Hill are officially clear to move on to tax reform, a must-pass agenda item decades in the making that will test the party’s unity and could seal their fate in the 2018 midterm election.
Republicans pledge they’ve learned valuable lessons from the collapse of the health care overhaul effort. Members largely say they feel as though they understand the contours of the tax plan better than they did the GOP’s health care bill and many say that they are more confident that their own leadership, the White House and the Senate are on the same page when it comes to shared principles. But ambitious deadlines announced by both House and Senate leaders underscore there isn’t much room for error if the party is going to finish tax reform before Christmas.
“This is an opportunity to get it done. It doesn’t come very often. Particularly after the failure on health care in the Senate, it adds a sense of urgency,” said Rep. Tom Cole, a Republican from Oklahoma.
House Ways and Means Committee Chairman Kevin Brady officially announced Thursday that he will unveil the House’s tax legislation on November 1, plans for it to be marked up the week of November 6 and expects it to be passed out of the House the week of November 13. Fellow Texan John Cornyn, the majority whip in the Senate, told reporters Thursday the Senate hopes to pass its bill the following week of Thanksgiving.
The key for Republicans will be to move rapidly once the bill is released in an effort to prevent a lobbying pile-on from special interest groups trying to save their deductions. And there’s plenty of hurdles ahead.
“My joke is everybody wants lower rates, no one wants to lose their deduction,” said Rep. John Shimkus, a Republican from Pennsylvania.
Republicans managed to pass their budget 216 to 212 Thursday, a move that will fast track the tax reform effort and enable the Senate to pass a tax bill with a simple majority. But the narrow victory also signals potential trouble. A key sticking point remains what to do about deductions for state and local taxes, commonly referred to as SALT on Capitol Hill. The GOP’s initial tax framework eliminated the popular deduction in order to offset the cost of lower tax rates across the board. However, that elimination nearly cost GOP leaders in the budget vote Thursday. The deduction particularly benefits those living in high-tax states like New York, New Jersey and California — and those members have been vocal that they won’t ultimately back tax reform if the bill scraps SALT.
During a huddle with reporters after the budget vote, Brady confirmed that a compromise on SALT was still being negotiated, but he acknowledged that leadership will likely have to find a way to compromise to get tax reform across the finish line.
SALT, however, is just the beginning. As much as Republicans are desperate to put a legislative win on the board, the party will still have to swallow the elimination of dozens of popular deductions that matter to constituents and business interests in their districts if they want to lower the corporate tax rate to 20% and reduce rates across the board.
“You’ve got to close another $4 trillion in loopholes. It’s just simple math,” said Sen. Bob Corker, a Republican from Tennessee. “This is when the tough work (begins). Talking about rates? You know that’s easy. It’s fun. The work though to actually lower rates is in the closing of those loopholes.”
Complicating that matter further is President Donald Trump himself.
There is emerging concern on Capitol Hill that Trump’s impulsive nature could create real problems as the party negotiates tax reform. During the health care effort, Trump celebrated the House’s passage of their health care bill only to say weeks later that their bill was “mean.” And, already this week, Trump tweeted that he was opposed to any plans to change 401(k) savings plans, one of the potential ways Republicans could finance tax cuts.
Asked about whether he was concerned about Trump’s role, House Speaker Paul Ryan responded humorously at his news conference Thursday that at least for next week, “He’s going to be in Asia.”
“That was kind of a joke. I was sort of joking on that one,” Ryan said.
The budget fast tracks tax reform, but what comes next is the real show. Senate Majority Leader Mitch McConnell has a narrow majority. He can only afford to lose two members and still pass tax reform. Already, some of his members are drawing red lines. Corker has said he won’t vote for anything that adds “one penny” to the deficit and Sen. Jeff Flake, a Republican from Arizona who announced this week he wouldn’t seek re-election, told CNN that he too wasn’t going to vote for just any tax bill if he thought it was fiscally irresponsible. There will be dozens more battles in upcoming weeks after the real details emerge.
“Everybody knows what the buffet looks like, but we can’t all have a dish of everything,” said Republican Sen. John Kennedy of Louisiana.
Still, senators are motivated. It was in their chamber that the health care bill failed and many members are facing potential primary challengers in 2018. Republican leaders and rank-and-file members acknowledge that failure on taxes isn’t an option and that the best way to neutralize any challenge — especially one cheered on by Trump’s former chief strategist and now outside ally Steve Bannon — is to be able to have something on the campaign trail to show for your work in Washington.
“This is not the first time we’ve had people encouraging primaries and the best solution to that is recruit good candidates and win the primary,” Cornyn said.
Asked how crucial tax reform was to making sure leadership-backed candidates won their elections, he responded “very.”
Flake outlined the key issue his party faces next year.
“I think all of us have known that we need to have a couple of big accomplishments,” he said. “We haven’t had them.”