Rewriting tax code, overhauling welfare on conservative agenda
House conservatives say they want to couple the GOP’s attempt to rewrite the tax code to an even more ambitious overhaul of the federal government’s welfare system, weighing down what was already a heavy lift for GOP leaders.
Members of the conservative House Freedom Caucus have floated attaching some $400 billion in reductions in projected welfare spending to the tax debate, saying they might accept a less generous tax cut if they can get budget trims elsewhere.
“Maybe we as the Freedom Caucus can live with a higher budget number if, in fact, we do real welfare reform on the tax bill,” said Rep. Jim Jordan, Ohio Republican and a past chairman of the group of about three dozen conservatives.
The call comes as other Republicans have balked at the scope of the GOPs tax plans, which would eliminate a number of popular tax breaks, including the deduction for state and local taxes.
Eliminating those deductions could produce about $2 trillion in additional revenue over a decade — money that could then be plowed into lowering tax rates across the board.
But blue-state Republicans are fighting to preserve the deduction, which generally benefits their constituents.
“It would be a significant challenge for New Jersey if we were not to have the deductibility of state and local taxes,” Rep. Leonard Lance, New Jersey Republican, told The Washington Times.
New Jersey’s entire House delegation, which includes Mr. Lance and four other Republicans, were among about 70 members who recently sent a letter to Treasury Secretary Steven Mnuchin urging him to consider preserving the state and local credit in tax reform talks, with powerful Appropriations Committee Chairman Rodney Frelinghuysen among the signatories.
Mr. Lance also said he wants to keep the deduction businesses can now take on research and development expenses, saying his district has many employees in the pharmaceutical and medical device industries who would benefit from the break.
“So yes, I want a continuation of making sure that there can be research and development in this country,” he said.
The resistance is emblematic of the problem Republican leaders have found. Every tax break in the code has defenders, and so far few people are willing to give up on their favored provisions for the sake of a broader tax reform.
GOP leaders had intended to keep two big breaks: the mortgage-interest and charitable-giving deductions.
Some Republicans on the budget committee have indicated they could get going on a 2018 budget plan as early as this week, which would lay out the framework for tax reform.
But Mr. Jordan said it’s not a given that Republicans will be able to even pass a budget this year. That failure would upend the plans House Speaker Paul D. Ryan and Senate Majority Leader Mitch McConnell have been talking about for months.
“You can’t get tax reform if you don’t have reconciliation instructions. You can’t get reconciliation instructions if you don’t pass a budget,” Mr. Jordan said, speaking at a recent Heritage Foundation forum.
Republicans also have yet to work out internal divisions over a proposed 20 percent tax on imports, known as a border adjustment. The tax, expected to raise about $1 trillion over 10 years, enjoys support from advocates like House Ways and Means Chairman Kevin Brady and Mr. Ryan, who say it would level the playing field for U.S.-made products.
But GOP senators say it could translate to higher prices on consumer goods, and that it’s dead on arrival in the upper chamber. The tax also hasn’t been embraced by White House officials, who hope to have a unified Republican tax plan ready for floor consideration during the first half of September.
Sen. Orrin Hatch, Utah Republican and chairman of the Senate Finance Committee, also indicated Monday that President Trump could be open to a compromise on his desired 15 percent corporate tax rate. House Republicans have proposed a 20 percent rate, though both proposals would be down from the current 35 percent rate.
“It’d be wonderful if we could get them down to 15 percent,” Mr. Hatch, a key tax-writer, told Fox Business Network. “Now, I think the president has probably come off that particular figure recently … if we could get [them] down to 25 percent or 20 percent, this country would turn around, I think, overnight.”
For now, Mr. Brady says he’s weighing the conservatives’ proposal for smaller tax reforms in exchange for bigger entitlement spending changes.
“We’re looking at that. I get the argument that we need a workforce ready for a much stronger economy,” said Mr. Brady, Texas Republican.
“Maybe we as the Freedom Caucus can live with a higher budget number if, in fact, we do real welfare reform on the tax bill,” said Rep. Jim Jordan, Ohio.