GOP Unified on Tax Overhaul — for Now

Freedom Caucus clears path to move forward

From left, House Speaker Paul D. Ryan, Utah Sen. Orrin G. Hatch and Senate Majority Leader Mitch McConnell at Wednesday’s unveiling of the GOP tax overhaul framework. (Bill Clark/CQ Roll Call)

Most rank-and-file Republicans seemed pleased initially with the tax overhaul framework their leadership presented Wednesday, but the nine-page document leaves a lot of questions unanswered that could unravel GOP unity in the weeks and months ahead.

Key among the remaining questions is how much revenue the tax plan would raise or lose, the answer to which will determine how much of their legislation can be made permanent policy under the budget reconciliation rules.

Other issues the document remains silent on are: whether the tax overhaul will be made retroactive to Jan. 1, 2017, at what rates multinational corporations’ existing and future foreign earnings will be taxed and whether to keep, cut or curb a litany of existing tax incentives for individuals and businesses.

Few of the details the framework does outline are new, as many of the proposals were previously included in the House Republicans’ “A Better Way” plan released last year. For example, the proposed business tax rates of 20 percent for corporations and 25 percent for small businesses track with the House GOP plan.

Still, this framework is billed as a product of the so-called Big Six tax negotiators: House Speaker Paul D. Ryan, Senate Majority Leader Mitch McConnell, House Ways and Means Chairman Kevin Brady, Senate Finance Chairman Orrin G. Hatch, Treasury Secretary Steven Mnuchin and White House chief economic adviser Gary Cohn.

Ryan, McConnell, Brady and Hatch held a press conference Wednesday with other lawmakers on Capitol Hill to announce the framework, while Mnuchin and Cohn traveled to Indiana with President Donald Trump, who delivered a speech about the plan.

The framework and the tax overhaul effort seem to be driven more by the House than the Senate.

“No one has been more passionate about what we’re announcing today than the speaker,” McConnell said.

The Kentucky Republican spoke after Ryan, who led the press conference.

Brady in a later conversation with reporters also indicated the House is in the driver’s seat.

“This president believes in the Constitution where all revenue measures originate in the House,” the Texas Republican said. “So the framework recognizes that it’s our committee that will take the first step and fill in those details.”

Watch: Ryan Touts ‘Simple, Fair’ Tax Overhaul Plan

Tax timing

On timing, Ryan told House Republicans during a half-day tax overhaul retreat Wednesday that his goal is to move legislation through the House by the end of October, giving November to the Senate, and leaving a few weeks in December to hash out differences between the two chambers. Such a timeline would meet Ryan’s goal of sending a tax overhaul measure to Trump’s desk before the year ends.

Brady said the Ways and Means Committee has been drafting the tax bill for months and will use the framework to flesh out remaining details so a comprehensive measure is “ready when the budget is signed, sealed and delivered.”

The budget resolution should hit the floor next week, House Majority Leader Kevin McCarthy told the GOP conference. The measure, which provides the budget reconciliation instructions for the tax overhaul, had been stalled as members had declined to support it without more details on the tax plan.

The hard-line conservative House Freedom Caucus, the primary group withholding support, took an official position Wednesday in support of the tax framework and the budget resolution. That means at least 80 percent of the caucus’s 36 members are committed to voting for the budget.

“We feel like we have enough of a level of detail right now to open the gate to at least go to the next step,” Freedom Caucus Chairman Mark Meadows said. “Now that doesn’t necessarily translate into a total support of what’s going to come out of a markup on Ways and Means, but this is an interactive discussion right now.”

The North Carolina Republican acknowledged that the tax framework does leave a number of unanswered questions but said nothing in it is a nonstarter for him.

“In fact, all of what is in the framework is something that I’ve either supported privately or certainly have a positive personal opinion about,” Meadows said.

Potential clashes

The House will likely move a tax bill first but the Senate is still writing its own legislation, setting up a potential health care-like debacle with drastically different plans in each chamber. A conference committee could be needed to reconcile differences if both chambers successfully pass legislation.

Passage of a tax bill in either chamber is far from guaranteed — despite Republican leaders’ confident rhetoric.

One key issue already standing in the way of united GOP support is a proposal to eliminate the state and local tax deduction that primarily benefits high-tax states such as New York, New Jersey and California.

The framework does not mention the controversial elimination, but Brady said tax writers currently have no plans to maintain the deduction. Work continues with lawmakers who have concerns about repealing it, he said.

“In fact, we’ve gotten some very good suggestions on how to address that issue in a very positive way,” he said. 

Still, a number of members signaled to leadership that the deduction is important to earning their support.

New Jersey GOP Rep. Tom MacArthur said he didn’t know if a tax bill could pass without it. “But I am going to do what I can to rally states like New Jersey, New York, Pennsylvania, California, Illinois, Connecticut. It’s not fair to give the entire country a tax break on the backs of the citizens of these six or seven states.”

Once the full tax bill is released, other Republican pressure points could pop up.

“How some of the specifics impact different constituencies is something we all still have to work through,” Pennsylvania Rep. Ryan A. Costello said. The GOP’s optimism is based on the framework, he said.

“I need to be able to see what the full proposal is,” Costello said. “What the implications are, what the trade-offs are, what the projections would be.”

Democrats object

By repealing the state and local deduction, Republicans risk tanking whatever legislation emerges unless they can make up for it by attracting Democrats to support the plan.

Based on the criticism of the GOP tax framework coming Wednesday from the minority party, that would be difficult.

Democrats continued to tout the GOP plan as a giant tax cut for the wealthy.

The framework calls for collapsing the existing seven individual tax brackets into three with rates of 12, 25, and 35 percent. The document does not specify the income thresholds at which the brackets will be set.

The current top individual rate is 39.6 percent, which means high-income earners will see a statutory tax rate cut. Republicans say that by eliminating most itemized deductions, the wealthy will not be paying less in taxes overall. But Democrats are skeptical. 

“I think they need to stop advertising this as an exclusive middle-class tax plan,” Ways and Means ranking member Richard E. Neal of Massachusetts said. “When you look at repeal of the estate tax and when you look at moving the top rate from 39.6 to 35 [percent], those are two examples that come to mind about substantial tax relief beginning for people at the top.”

Those two items at the moment are nonstarters for Democrats, Neal said.

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