Senate Republicans have not yet come to a consensus on several crucial decisions that must be made before any serious work begins on legislation to overhaul the U.S. tax code.

Complicating that effort are a number of pressing deadlines the chamber faces, including funding the government past the end of September, the upcoming debt ceiling, and a pending reauthorization of a popular children’s health insurance program. 

In the aftermath of the failed attempt to repeal and replace the 2010 health care law, lawmakers are now turning their attention to the next big-ticket item on the agenda — a tax overhaul. Congressional GOP leaders — including House Speaker Paul D. Ryan and Senate Majority Leader Mitch McConnell — have been working in private with the White House on a blueprint for the pending legislation, though details from those huddles have been sparse. 

While administration officials are aiming to have work done on the tax overhaul in the next few months, lingering questions over the basic parameters for the effort put that timeline in serious jeopardy.

Deficit decisions

Republicans, for example, are still debating whether the bill must remain deficit-neutral.

“That’s got to be front and center within the conference, because there’s obviously differing opinions on it,” Sen. Shelley Moore Capito of West Virginia said last week. “We’re just getting started.”

One proposal under discussion, according to multiple GOP lawmakers, is using the money banked from a potential repatriation tax — a one-time tax on U.S. businesses who bring back offshore earnings — to fund an infrastructure package, an idea that former President Barack Obama advocated and some Republican members have endorsed in the past.

“The only reason to do that is if you have a bipartisan opportunity,” said Sen. Tim Scott of South Carolina, a member of the chamber’s Finance Committee that has jurisdiction over tax issues. “It’s probably on the beginning end of the discussion.”

While it is still under debate, moving forward with such a proposal would mean the bill would almost certainly add to the deficit, which could elicit pushback from some in the Senate GOP conference who had hoped to use the repatriation tax to help fund tax cuts.

Kentucky Sen. Rand Paul said the debate gets to the heart of what the Republican Party stands for — whether to advance legislation to cut taxes or a measure that he referred to as a “tax-shifting” bill that would “move the taxes around but the overall effect on the economy is zero.”

“I think it pits the establishment, which really is for revenue-neutral, against the conservatives that would rather see a tax cut,” he said.

“I frankly don’t think you have to pay for tax cuts. We should just put forward a bill that cuts taxes and then take some of the revenue that comes in from repatriation and I would program it towards roads and bridges,” Paul said. “But you can’t do that and also insist that the bill be revenue-neutral.”

McConnell, in an interview with Bloomberg News in May, said a tax overhaul shouldn’t add to the budget deficit.

“It will have to be revenue-neutral,” the Kentucky Republican said. “We have a $21 trillion debt.”

Other factors

Senate Republicans also face questions over how to analyze the budgetary impact of the bill. There is growing consensus within the GOP conference, according to several senators, to use a process that would take into account the macroeconomic reaction to the new policy, a method known as dynamic scoring.

McConnell, before the Senate left for its 32-day recess, reaffirmed the Republican strategy to use a fast-track budget procedure known as reconciliation that would require only a simple majority in the Senate to advance a tax overhaul — the same process used for the failed health care effort. But unlike the attempt to revamp the U.S. health insurance system, the tax legislation will move through the standard committee process.

The White House continues to make a push for the Senate to continue work on the health care measure but Republican senators have already begun to pivot to the tax overhaul.

“We must ensure comprehensive tax reform includes specific and meaningful tax relief for parents,” Sen. Marco Rubio of Florida wrote in an op-ed last week for the far-right Breitbart News. “The upcoming debate about tax reform should be grounded in the realities they face every day: a fixed budget, stretched paychecks, and tough choices about putting food on the table and participating in kids’ sports leagues.”