US Senate passes budget, in first step towards tax overhaul
WASHINGTON: The US Senate narrowly passed a 2018 federal budget Thursday, clearing the way for President Donald Trump’s controversial tax overhaul that includes US$ 1.5 trillion in tax cuts.
The Republican measure, which passed along party lines, is a largely symbolic gesture. But importantly, it includes special instructions that allows Trump’s party to pass historic tax reforms with a simple majority vote.
“With this budget, we’re on a path to delivering much needed relief to American individuals and families who have borne the burdens of an unfair tax code for entirely too long,” Senate Majority Leader Mitch McConnell said immediately following the 51- 49 vote.
Trump hailed the vote as ‘an important step in advancing the administration’s pro-growth and pro-jobs legislative agenda’, saying it “creates a pathway to unleash the potential of the American economy through tax reform and tax cuts.”
Nine months into his presidency, Trump’s tax gambit is the last chance to salvage key planks of his 2017 legislative agenda.
After failing to repeal former president Barack Obama’s health care law, adoption of tax cuts before year’s end has become the top priority for Republicans who control Congress.
Trump took office in January arguing that tax reform will further boost the economy and benefit ordinary Americans.
“Frankly, I think we have the votes for the tax cuts which will follow fairly shortly,” Trump said at the White House.
“We’re really doing well, but we can do something very, very spectacular if we’re given the tax cuts.”
The politically explosive reforms are being addressed in several steps, beginning with Thursday’s vote on a resolution to establish the 2018 budget framework.
The measure contains language that allows the Senate to use a process known as ‘reconciliation’ to fast-track the tax overhaul by requiring only a simple majority in the 100-member Senate, instead of the 60 generally required to move major legislation.
With Senate Republicans holding 52 seats, that would mean they no longer need Democratic support, unless there are more than two Republican defections.
The basis of the reforms, outlined last month, is a drop in the corporate tax rate from 35 to 20 per cent, a reduction in income tax for the majority of income groups, and the elimination of loopholes and deductions to fix a tax code which Trump calls a ‘relic’.
The top one per cent of earners will see their after- tax incomes rise 8.5 per cent in 2018, while the 95 per cent lower down the scale will see a gain of 0.5-1.2 per cent, according to the Tax Policy Centre, a Brookings InstitutionUrban Institute joint venture.
The centre says the reforms will cost US$ 2.4 trillion in lost federal revenues during their first decade, which raises questions about how they will be fi nanced.
Republican supporters of the changes say the tax cuts will more than cover the huge shortfall by spurring economic growth, which would lead to future tax revenues.
Democrats have strongly denounced the tax cuts as a US$1.5 trillion giveaway to the rich, and said the budget framework would dramatically slash funds for education, transportation and infrastructure, while cutting deep into federal health programs for the elderly, the poor and the disabled.
“This nasty and backwards budget green lights cuts to Medicare and Medicaid in order to give a tax break to big corporations and the wealthiest Americans,” warned Senate Minority Leader Chuck Schumer.
Senator Bernie Sanders blasted the budget resolution as ‘horrific’ and “extremely cruel.”
Fiscal conservatives worry a tax cut will add to the national debt, but Trump has called for Republican unity after some in the party balked at supporting a bill that would dismantle much of Obamacare.
Treasury Secretary Steven Mnuchin said failure on tax reform could spark a crash in US stock markets which have repeatedly hit records in recent weeks. — AFP
With this budget, we’re on a path to delivering much needed relief to American individuals and families who have borne the burdens of an unfair tax code for entirely too long. Mitch McConnell, Senate Majority Leader