Budget & Taxes

Republicans Trade a Math Problem for a Political One

First Read: “But even if the legislation does pass (and it seems like Senate Republicans are doing whatever it takes to pass it) they won’t have an easy time selling it to the American public. Higher premiums, fewer who are insured, tax cuts for corporations, estate-tax repeal for the wealthiest of Americans – the TV ad attacks in 2018 are easy to envision.”

“And pairing repeal of the individual mandate makes it all but impossible to get some Senate Democrats (West Virginia’s Joe Manchin, North Dakota’s Heidi Heitkamp, Indiana’s Joe Donnelly) to support the GOP’s tax plan. And we’ve seen how partisan legislation plays with the American public at the ballot box.”

“Bottom line: Senate Republicans may have solved their math problem by repealing the individual mandate, but they’ve now added other problems to their tax plan – a week after health care was the most important issue in Virginia’s gubernatorial election, per the exit poll, and after Maine easily passed Medicaid expansion. What’s more, only 27 percent of Americans approve of President Trump’s handling of health care, according to last month’s NBC/WSJ poll.”

Senate GOP Will Try to Repeal Obamacare Mandate

“Senate Republican leaders have decided to include a major change to their fast-moving tax cut bill that would repeal a key plank of the Affordable Care Act, trying to accomplish two of their top domestic priorities in a single piece of legislation,” the Washington Post reports.

“Republicans had so far resisted making the change, worried that injecting health care politics into the process could imperil the tax bill, but many of their members have supported the idea and they appear on the verge of including it.”

New York Times: “Repealing the so-called individual mandate, as President Trump had urged, would help Republicans with the difficult math problem they face in refining their tax plan. But it also risks reigniting the contentious debate over health care that Republicans found themselves mired in for much of the year.”

Robbing Blue States to Pay Red

Jacob Hacker and Paul Pierson: “Much of the debate over the Republican House and Senate tax plans has centered on how they will shift income toward the affluent. But there is a second kind of redistribution in the plans — from Democratic blue states to Republican red states.”

“Call it the Republican two-step: redistribute upward, then sideways. The biggest beneficiaries are corporations and the rich regardless of where they are. But under the Republican plans, half of these big cuts have to be paid for in the first 10 years (the other half will be added to the national debt, increasing it by $1.5 trillion). And these ‘pay-fors,’ as they’re called, are predominantly aimed at blue states.”

Still No Path Forward on Tax Bill

Playbook: “With the Roy Moore controversy continuing to rage, Republicans in Washington are looking to return to more comfortable territory this week — tax reform. After months of work, the House is expected to pass its overhaul of the tax code while the Senate Finance Committee is slated to pass their own version. The forward progress is welcomed by the White House and GOP operatives who believe passing a tax package before the midterm elections is even more essential to holding their majorities in Congress than it was just a week ago.”

“Nothing is over in Washington until it is over. There are still massive differences in the House and Senate bills and it’s unclear how Republicans will find a path forward on key issues like state and local tax deductions. So Republicans could find themselves one step forward, two steps back when it comes to final passage.”

Republicans Have Actually Made Tax Cuts Unpopular

Jonathan Chait: “There was a time when liberal professionals, watching in horror as Republican presidents drove the federal budget into a ditch, could at least count on the semi-guilty consolation of a tax break. And I would indeed be happy to have my tax rate raised for the purpose of reducing the deficit or funding important social needs. But the prospect of paying higher taxes in order to finance gigantic tax cuts for much richer people is a novel misery. The comprehensive awfulness of the Trump administration has extended into new terrain.”

“The Republican government seems hell-bent on this course.”

How Last Week’s Elections Will Impact the Tax Bill

Stan Collender: “Individual members are at least hinting — and many are openly saying — that the Republican Party is no longer as important as their personal reelection prospects. That means the bill’s enactment may not be as important to them as preventing locally politically noxious individual provisions — like the deductibility of state and local taxes  — from becoming law.”

“With support for the Republican party no longer a guaranteed political lever, the leadership has little choice but to try to appease senators and representatives by changing proposed tax provisions so the recalcitrant members have something they can take back to their constituents to demonstrate their personal value. But in a tax bill of this size that has budget restrictions that limit what may be done, almost every modification made for one representative or senator typically will cause political pain for another and, therefore, no net increase in support.”

McConnell Admits Some May Get Tax Increases

Senate Majority Leader Mitch McConnell (R-KY) acknowledged “that the Republican tax plan might result in a tax hike for some working Americans, saying he ‘misspoke’ days earlier when he said that ‘nobody in the middle class is going to get a tax increase’ under the Senate bill,” the New York Times reports.

Said McConnell: “I misspoke on that. You can’t guarantee that absolutely no one sees a tax increase.”

“The Senate bill unveiled on Thursday would raise taxes on millions of middle-class families, according to a preliminary New York Times analysis. The plan would also disproportionately benefit high earners and corporations. Still, middle-class earners would fare better under the Senate proposal than its counterpart in the House.”

Not Much of a Tax Cut for Ordinary Americans

John Cassidy: “The business tax cuts and A.M.T. abolition don’t leave any room for ordinary American households to receive substantial tax cuts. Both Republican bills do expand family tax credits and reduce the marginal tax rates that most households would face; but they also claw back a lot of revenue in other ways, some of which are targeted at families.”

“The upshot of all this is that the Republican tax proposals, which Trump has promoted by promising the biggest tax cuts in history, isn’t much of a tax cut at all in the sense that most Americans understand the term. It’s really designed to reduce the tax burden on businesses and wealthy individuals, and it could only be justified if, defying history, it delivered the economy-wide upsurge in G.D.P. growth, capital investment, and wages that the White House has promised, and which Cohn talked about in his interview. The supposed middle-class tax cuts are a fig leaf.”

GOP Panic Boosts Tax Cut Plan Chances

Jonathan Swan: “With the release of the Senate’s plan yesterday, tax cuts are off to a stronger start than health reform’s fraught debut earlier this year. You’ve got high top rates on wealthy people, a concession to the left — yet tons of loopholes and crony tax breaks. Even Republicans who have been skeptical all year about tax reform’s prospects say they see glints of momentum.”

One reason: “Sheer political panic: This may be Republicans’ only chance to hold onto the House. GOP leaders, especially Speaker Ryan, are under no illusions — particularly not after the results in Virginia.”

Another: “Donor pressure: As members and senators have admitted out loud, donors won’t be returning phone calls if united GOP government can’t deliver tax reform.”

Senate GOP Tax Plan Breaks with Trump

“Senate Republicans on Thursday plan to propose delaying a cut in the corporate tax rate from 35 percent to 20 percent until 2019, four people briefed on the planning said, a major departure from President Trump’s insistence on immediate changes that he says are necessary to spur the economy,” the Washington Post reports.

“Some Senate Republicans objected internally to the one year delay, but they were overruled.”

Politico: “The change from the House bill, which would institute a 20 percent corporate rate in 2018, is likely to upset President Trump and the White House, which wants the change to happen as soon as possible.”

Trouble Brewing on GOP Push for Tax Reform

Playbook: “Not only will the Senate Republicans package being released today differ significantly from the House bill — Trump said Democrats will like it better! — but House Ways and Means Committee Chairman Kevin Brady is dealing with his own issues over concerns the bill provides massive tax cuts for corporations while individual industries are lobbying to keep their own tax breaks. To further complicate things, Republicans have a massive revenue shortfall they need to plug up.”

“Still in the mix: Including a repeal of the individual mandate to buy health insurance, which raises shy of $400 billion in revenue, but would complicate the political calculus in the Capitol.”