GOP tentatively OKs $1.5T cuts

WH weighs abandoning estate tax repeal

WASHINGTON, Sept 20, (Agencies): Senate Republicans are zeroing in on a tax outline that would add about $1.5 trillion to the government’s $20 trillion debt over 10 years, justifying the spurt of red ink with promises of surging economic growth and a burst of new revenues.

Tennessee Sen. Bob Corker, a member of the chamber’s dwindling band of deficit hawks, and Sen Pat Toomey, R-Pennsylvania, one of the chamber’s more ardent believers that tax cuts can pay for themselves, said they sealed an agreement on Tuesday.

The $1.5 trillion figure, confirmed by congressional officials familiar with the agreement, would allow deeper cuts to tax rates than would be allowed if Republicans followed through on earlier promises that their coming tax overhaul wouldn’t add to the deficit.

The agreement would represent an about-face for Capitol Hill GOP leaders such as Senate Majority Leader Mitch McConnell, R-Kentucky, and House Speaker Paul Ryan, R-Wisconsin, who for months have promised that the GOP tax overhaul would not add to the budget deficit, currently estimated to hit about $700 billion this year. Deficits over the coming decade were already projected to add $10 trillion to the debt.

The broad-brush tax cut number, if approved by the Senate, would pave the way for the Senate’s tax writers to slice corporate and individual tax rates and curb tax breaks in hopes of boosting economic growth to 3 percent or more as promised by President Donald Trump.

Corker and Toomey formally announced an agreement late Tuesday, but didn’t provide a specific dollar amount. They called it “a path forward on tax reform” that would allow for tax cuts over 10 years.

While each Republican senator will be able to make their own decision, “I believe our agreement gives the taxwriting committees enough headroom to achieve real tax reform that eliminates loopholes and lowers tax rates for hardworking Americans,” Corker said.

Corker had pressed for a lower figure, saying he didn’t want the GOP tax plan to cause the debt to spiral further. Now, he’s taking a more generous view of so-called dynamic scoring, which takes the economic effects of legislation into account when determining its impact on the government’s books.

“We hope this is highly pro-growth. We hope, by the way, that Congress will be firm in closing loopholes,” Corker told reporters. “Honestly, that worries me the most about all of this.”

The divide between the Senate GOP’s deficit hawk and “supply side” wings had taken weeks to resolve. Republicans preached a hard line on the deficit while Barack Obama was president but are taking a more lenient approach now that Trump is occupying the Oval Office, promising a huge budget boost for the military and signaling an openness to working with Democrats to increase domestic agency budgets, too.

Measure

Unlike the House, Senate Republicans aren’t planning to pair the tax measure with spending cuts.

The work of the budget panel is critical since Republicans need to agree on a budget plan in order to pass follow-up tax legislation without fear of a filibuster by Democrats. But both House and Senate Republicans are divided and the budget debate is months behind schedule.

Earlier Tuesday, Sen Ron Johnson, R-Wisconsin, one of the budget panel’s more ardent advocates of tax cuts, said a 10-year, $1.5 trillion tax cut “ought to be a minimum.”

Proponents of strict government spending policies swiftly condemned the agreement, warning of further ballooning of the national debt. “With the US in such a dangerous fiscal situation, policymakers shouldn’t even consider voluntarily adding another $1.5 trillion to our national debt,” Michael Peterson, president of the Peter G. Peterson Foundation, said in a statement. “Reaching $20 trillion in debt should be a wake-up call to solve our fiscal challenges, not an invitation to add to the problem.”

Many Republicans in Washington promise that cutting corporate and individual rates and ridding the code of inefficient tax breaks, deductions and preferences will boost the economy and cause a burst of new revenue. But the outlines of their tax plan itself remain secret, and it’s not clear how successful they will be in cleaning up the loophole-choked tax code.

Meanwhile, the Trump administration may abandon its promise to repeal the US estate tax on inherited assets in an effort to make a still-evolving Republican tax cut framework more politically feasible, according to sources familiar with the deliberations.

A so-called Big Six team of Republican tax package negotiators, including senior lawmakers and top Trump advisers, has been tight-lipped about the details that will be part of their plan, expected to be unveiled next week.

Republicans have long criticized the estate tax, saying it taxes hard-earned income a second time and hurts family-owned businesses and farms. Democrats say repealing it would be a windfall for only the wealthiest of taxpayers.

Overhaul

After months of debate about how to make good on a 2016 campaign promise to overhaul the tax code, Republican tax negotiators are in a bind. They have largely given up on a comprehensive revamp of the code and are now focused on a package of tax cuts for individuals and businesses.

To offset the revenue losses that would result from such cuts, they need new revenues and need to hold onto existing revenues to avoid expanding the federal deficit too much. To that end, Trump administration officials have considered keeping the revenue-raising estate tax, which is levied on estate assets worth more than $5.49 million, or $10.98 million for married couples, according to those familiar with the talks, but not authorized to speak about them.

“There have been high-level discussions in the White House about giving up on repealing the estate tax,” said a congressional aide.

The 40 percent estate tax currently affects just 0.2 percent of estates, or approximately 5,460 estates this year, according to the nonpartisan Tax Policy Institute, a think tank.

But the tax will raise between $25 billion and $34 billion annually over the next decade, the Congressional Budget Office has estimated.

A White House spokeswoman declined to comment on “rumors about internal deliberations,” but said President Donald Trump “has made it clear that his priority is ensuring American workers get a pay raise” by making the tax code more competitive.

In a recent meeting between Trump, Senate Democratic leader Chuck Schumer and House Democratic leader Nancy Pelosi, the president sought to make the case that his tax plan would not favor the rich. The Democrats pointed to the estate tax repeal, which was then included in the president’s plan, as one benefit for the wealthy, those familiar with the meeting said.

Though analysts had expected an estate tax repeal to take a back seat in the Republican tax push to other priorities, they cautioned that if the White House decides to abandon it, the plan would meet resistance from Trump’s own party in Congress. The Big Six team consists of Treasury Secretary Steven Mnuchin, the National Economic Council’s Gary Cohn, Senate Republican leader Mitch McConnell, House Speaker Paul Ryan, and Senator Orrin Hatch and Representative Kevin Brady, who head the tax committees in their respective chambers.

Abandoning estate tax repeal would please many Democrats, but make it more difficult to push the tax package through the House of Representatives, where conservative Republicans are already wary of the hush-hush negotiations.

“I do think reform will include, if not outright repeal, then a substantial relaxation and modification of the estate tax rules,” Deloitte’s Jonathan Traub told Reuters.

Republicans could tweak the estate tax by creating a higher exemption amount, lowering the rate, or a combination thereof. Or they could pursue a temporary repeal to preserve revenue without endangering the package’s prospects, said analysts and a former committee staffer now in the private sector.