US Senate passes budget

Move clears the way for Trump’s first step towards tax overhaul

Washington: The US Senate narrowly passed a 2018 federal budget, clearing the way for President Donald Trump’s controversial tax overhaul that includes US$1.5 trillion (RM6.3 trillion) in tax cuts.

The Republican measure, which passed along party lines, is a largely symbolic gesture. But importantly, it includes special instructions that allow 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.

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 healthcare law, adoption of tax cuts before the 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 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 yesterday’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 month, is a drop in the corporate tax rate from 35% to 20%, 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 1% of earners will see their aftertax incomes rise 8.5% in 2018, while the 95% lower down the scale will see a gain of 0.5% to 1.2%, according to the Tax Policy Center, a Brookings Institution-Urban Institute joint venture.

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 (RM6.3 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 programmes for the elderly, the poor and the disabled. — AFP