Budget writers plan $1.5 trillion in tax cuts
Republican senators struck a deal this week paving the way for potentially $1.5 trillion in tax cuts over the next decade, suggesting broad outlines of a plan to be presented next week.
Sens. Bob Corker, Tennessee Republican, and Patrick J. Toomey, Pennsylvania Republican, said their agreement on a 2018 blueprint will give lawmakers enough room to craft a tax package that lowers rates and flattens the code.
The plan could deepen the deficit in the short run, but the two budget writers hope it improves finances over time.
Mr. Corker’s backing was considered critical to writing a 2018 budget that would allow for debate on tax cuts without a Democrat-led filibuster in the Senate.
It also signals the kind of senator-bysenator negotiations Republican leaders are engaged in as they rush to meet a selfimposed end-of-year deadline.
Mr. Corker and Mr. Toomey didn’t specify a dollar number for the tax cut in their agreement, but Sen. Ron Johnson, Wisconsin Republican and another budget committee member, said party leaders are looking at a 10-year package that could result in a total $1.5 trillion revenue loss.
Mr. Corker said he hopes the final package looks better.
“Ultimately, my support will be contingent on a final package that generates significant economic growth and does not worsen but hopefully improves our fiscal situation,” he said.
Republican leaders have promised to release the outlines of their plans next week, paving the way for the tax committees in the House and Senate to begin hashing out details and for the budget committees to pass a 2018 spending plan that would unlock fast-track procedures, known as reconciliation, that they could use to avoid a filibuster.
With a one-vote Republican majority on the Senate Budget Committee, the agreement between Mr. Corker, a deficit hawk, and Mr. Toomey, who advocates even deeper tax cuts, was a crucial first step toward a blueprint.
Republicans complicated their schedule, however, by announcing a Senate vote on repealing Obamacare next week — smack in the middle of what they expected to be a chance to tout tax reforms.
“Everything gets in the way of tax reform, and we are going to have to be prepared to bulldoze through them,” Sen. Orrin G. Hatch, Utah Republican and chairman of the tax-writing Senate Finance Committee, told Bloomberg News.
Mr. Hatch is part of a working group that has been crafting broad principles for a tax package for months, and congressional leaders are planning to reveal more details next week. House Republicans are planning a half-day retreat Wednesday on tax policy.
The working group also includes House Speaker Paul D. Ryan, Wisconsin Republican; Senate Majority Leader Mitch McConnell, Kentucky Republican; House Ways and Means Committee Chairman Kevin Brady, Texas Republican; Treasury Secretary Steven T. Mnuchin; and White House economic adviser Gary Cohn.
Marc Short, the White House’s top liaison to Capitol Hill, said Thursday that Republicans have been reaching out to many Democrats on tax reform but are prepared to go it alone if necessary.
“Our aim is to make this bipartisan. We think it will make this a better bill. We think it’s better for our country to include their ideas, but at the end of the day, what’s most important is we deliver tax relief for the American people,” Mr. Short said on Fox News.
Democrats have indicated that they are unlikely to support a deficit-financed package geared toward cutting taxes for the wealthy, and outside groups said this week that it would be irresponsible to add $1.5 trillion to the national debt without a clear plan to pay for it.
“It’s time to stop pretending that tax cuts for the wealthy somehow pay for themselves,” said Rep. Scott H. Peters, California Democrat. “Tax reform needs to be paid for.”
If Republicans end up with a total tax cut near $1.5 trillion, then the package could be much less ambitious than the White House and congressional leaders envision and leave income tax rates higher than they would like.
A 1 percentage point increase or decrease in the corporate tax rate translates to roughly $100 billion in revenue over 10 years, according to the Joint Committee on Taxation, a nonpartisan panel that traditionally scores tax-related legislation for Congress.
That means a $1.5 trillion cut likely wouldn’t cover President Trump’s proposed 15 percent corporate tax rate — a 20-point reduction from the current 35 percent rate — and would barely cover the 20 percent rate House Republicans proposed last year. That doesn’t even touch the individual income tax rates that Republicans also want to tackle.
“[The corporate tax rate is] going to be right in that range, I think — 20, low 20s,” Rep. Erik Paulsen, Minnesota Republican and a member of the House Ways and Means Committee, said Thursday on Fox Business Network.
Republicans have said they will eliminate existing tax breaks and use the additional revenue to lower rates.
Mr. Ryan and Mr. Brady have long said the goal is to pass a revenue-neutral package this year and that businesses and individuals need the certainty that comes with permanent changes to the tax code.
Under budget rules, any deal that deepens deficits must expire after 10 years. That was the case with the Bush-era tax cuts, which were set to expire in 2010 and created the “fiscal cliff” in 2012.
The House Budget Committee has written a 2018 budget that calls for a comprehensive tax reform that does not increase the federal deficit.
Mr. Ryan has said it is more important to pass a pro-growth package, but Mr. Paulsen said Thursday that lawmakers are still looking at plans that would balance over time.
“In the House, we’re working on revenueneutral plans, so we’re looking at middleclass tax cuts, we’re looking at consolidation of rates across the board that’ll help small business, which is the engine of our economy, of course, grow new jobs,” he said.