Republican lawmakers tried to focus on tax reform amid a dizzying news cycle this week, but their overly optimistic attempt to pivot to the agenda item may be in vain.
“I think that all the storm clouds that are in and around Washington right now could well delay or defer big issues like tax reform,” Rep. Mark Sanford (R-S.C.) told Independent Journal Review this week. His concern isn't an uncommon one among Republican lawmakers.
But GOP leaders insist the conference will be able to trudge ahead, despite delays and ideological conflict.
“We’re going to walk and chew gum at the same time,” House Speaker Paul Ryan (R-Wis.) told reporters at a press conference Thursday morning, promising to deliver on tax reform by the end of the year.
That may prove a tall order, as lawmakers are not only racing against the clock to enact substantive tax reform in a quickly closing legislative window but also are trudging through a health care quagmire with the American Health Care Act in the Senate while contending with a seemingly endless flow of controversies from the White House. Aside from those immediate challenges, the granularities of the tax reform debate won't be especially forgiving in comparison to the health care push, as some lawmakers have suggested.
“Health care policy: there’s some nuts and bolts, but it’s mostly philosophical,” a Republican tax lobbyist told IJR. “Those tradeoffs fall along predictable lines, whereas with tax policy, none of it is.”
The time limitations and discord Republicans face could render unlikely the “bold, permanent tax reform that's balanced with the budget” House Ways and Means Chairman Kevin Brady (R-Texas) described as his goal this week.
“If the Senate’s taking a nap and the Treasury is just writing shit that was in the campaign plan on a cocktail napkin….” the tax lobbyist observed of the situation, “I’m a cynic.”
But he praised the House GOP's efforts as a serious attempt to craft policy, noting:
“The House plan is a solid, well thought out product. The problem is that it has enough to detail to create fierce enemies, but not enough to win the sort of friends it needs. Any attempt to reform the code entails trade-offs, but when the losers are clearer, or more acute than the winners, you have an asymmetrical problem.”
The White House's vague tax plan, released last week, differs from the House blueprint in several aspects, calling for more drastic cuts to the corporate tax rate — bringing it down from 35 percent to 15 percent — without addressing how to pay for them. Trump has signaled he doesn't care if the bill adds to the deficit.
White House officials have suggested the plan could be paid for by economic growth resulting from an expected increase in investments within the United States, an eyebrow-raising strategy, at least for Democrats.
GOP lawmakers, on the other hand, want a revenue-neutral plan in order to comply with the reconciliation process. That would allow Republicans to push legislation through Congress without needing to add votes from Democrats since they would only need a simple majority of 51 votes in the Senate.
Hill Republicans are less bullish about how far they can slash the corporate tax rate and are determined to make the plan revenue-neutral. For their part, tax policy experts believe cutting the rate to 25 percent is plausible.
Still, rank-and-file Republicans are far from consensus on the three options Ryan outlined to finance the cuts.
His plan includes several mechanisms to raise one trillion dollars to offset the tax cuts, the most contentious of which is a border adjustment tax on imports paired with a cut to fees on exports. That idea, already unpopular in the House, is dead in the Senate, where few lawmakers are willing to entertain alienating companies and consumers who depend on cheap imported products in their respective states.
House Freedom Caucus Chairman Mark Meadows (R-N.C.), a key negotiator in the GOP's now-successful attempt to pass its health care bill in the House, has attempted to iron out some differences within the conference on controversial provisions like the border adjustment tax.
Meadows told reporters Thursday afternoon he's been meeting with GOP leaders and members to get a sense of where the debate is headed.
“We’re going to have to make a decision on the border adjustment tax, I believe, in the next two weeks,” he said. “We’re going to have to make some very difficult decisions very quickly."
House Ways and Means member Rep. Carlos Curbelo (R-Fla.) doesn't agree that efforts broadly are lagging.
“I don’t know why people think that,” he said. “We work on it almost every day, and we’re making great progress. Just because nothing’s being marked up today doesn’t mean we aren’t working towards a product.”
Curbelo’s committee held its first hearing on tax reform Thursday, and he said on both sides of the aisle, “There’s a lot more flexibility and space in which to maneuver than people would assume.”
Senate Majority Leader Mitch McConnell (R-Ky.) refuses to be constrained by a definitive timeline on the matter, resisting House GOP assurances that the plan will be implemented by the end of the year. “I’m confident we can get it done,” McConnell told Bloomberg this week, but, “I’m not going to put a deadline on it.”
His critics doubt much meaningful reform will be done, and victory may wind up as a simple tax cut.
Administration messaging is starting to reveal that. Vice President Mike Pence described it this way Thursday morning:
Congressional Republicans are reluctant to admit a temporary tax cut without significant changes to the tax code may be their most likely fallback. “We want permanent, revenue-neutral, bold tax reform. Tax cuts aren’t going to cut it,” Curbelo told IJR.
And if Republicans can't do that before the August recess? “We should stay here and get it done,” Meadows answered.