Politics

Republicans Go For Broke on Tax Cut Message With 2.0 Effort

Making individual tax cuts permanent is centerpiece of developing 3-bill package

House Ways and Means Chairman Kevin Brady, R-Texas, briefed House Republicans Tuesday on his panel’s developing “Tax Reform 2.0” plan. (Tom Williams/CQ Roll Call fie photo)

House Republicans have made clear that the tax overhaul bill their party passed last year is their primary selling point to voters on why they should keep them in the majority come November. 

Now they’re doubling down on the tax cut message as they prepare a three-bill package they’re calling “Tax Reform 2.0.”

The Ways and Means Committee on Tuesday released a two-page outline of the 2.0 plan, which they plan to introduce as legislation after the House returns from its late summer recess in September. The goal is for floor votes on the three bills this fall before the House adjourns again for the midterm elections.

The primary piece of the package will be a bill to make the individual tax cuts permanent. The other two bills will focus on retirement and business innovation tax incentives, respectively. Proposals include creating a Universal Savings Account and allowing start-up businesses to write off more of their initial costs.

Packing the 2.0 proposals in multiple bills was designed “to allow the House and the Senate to sort of set the right timing and engage the interest separately on each of the three areas,” Ways and Means Chairman Kevin Brady told reporters after holding a listening session for House Republicans on the 2.0 framework.

“Obviously [Senate Majority Leader Mitch] McConnell is interested in what can achieve 60 votes, so I think it makes sense to send them a package that allows them to identify which ones can move,” the Texas Republican added. 

The bill to make the individual tax cuts permanent is the least likely to get 60 votes in the Senate, as it’s not clear whether any Democrats would support that without plans to offset its cost, and even some Republicans have expressed concern about the cost if it is not offset. With the price tag expected to fall somewhere in the $600 billion range, the permanency measure is likely to be the most expensive part of the 2.0 package.

Because Republicans used the budget reconciliation process to pass their original tax overhaul, they had to ensure the cost of the measure did not exceed $1.5 trillion, as specified by the reconciliation instructions the House and Senate agreed to in their joint fiscal 2018 budget resolution. 

In House-Senate conference negotiations, lawmakers ultimately decided to have the tax cuts they were enacting on the individual side of the code expire after 2025 so the projected revenue loss would remain under the $1.5 trillion target. Corporate tax cuts, however, were made permanent under the bill.

Republicans argued at the time that it would be much easier for Congress to go back and make the individual tax cuts permanent later. In addition to individuals, couples and families, small businesses pay taxes on the individual side of the code. 

And although those cuts won’t expire for more than seven years, House Republicans think now is the time to make that happen. 

“We’ve got some momentum behind us,” Ways and Means member Mike Bishop said, noting “the initial kickback” members have heard from constituents is that they want Congress to lock in the individual rates.

“I won’t discount that there are politics involved with everything that goes on here,” the Michigan Republican said when asked if the goal was also to fight back against Democratic criticisms that the tax law favors corporations over middle-class families. “But the reality is this is a responsible way of handling it. ... It’s something that our constituents want.”

More additions?

Several Republicans leaving Brady’s listening session Tuesday said they were pleased with the direction of the 2.0 package, but some wanted some other proposals to be considered. 

“I think it’s a pretty good package myself,” Alabama Rep. Bradley Byrne said. “Only thing I would add to it is that we put a provision in the tax reform bill we passed last year that would actually create a new tax on private college endowments; I think we need to repeal that.”

Arizona Rep. Andy Biggs said he would like to see the 2.0 effort include some improvements to the treatment of small businesses that are organized as pass-through corporations and indexing for capital gains. 

Brady said there will be future efforts to improve the tax code beyond 2.0 and that on issues like capital gains, they’re discussing with House Republicans the best timing for addressing them, suggesting they may be part of a 3.0 or 4.0 effort. 

“We’re going to consider those ideas, and they certainly haven’t been excluded from 2.0,” he said.

Some of the smaller tweaks to the tax law are expected to come in a technical corrections package that Speaker Paul D. Ryan said recently would be brought up during the lame-duck session after the November elections.

Democrats were quick to criticize Republicans’ 2.0 plan, especially since they’ve been excluded from discussions on it — much like they were with the GOP’s original tax overhaul. 

“Instead of repeating Republicans’ mistakes from December by considering a second tax bill through another closed process, without any substantive hearings or input from the American people, Democrats have a different approach,” House Minority Whip Steny H. Hoyer said in a statement. “Democrats want to do tax reform the right way — in a bipartisan fashion and with a commitment to fiscal sustainability.”

Minority Leader Nancy Pelosi said the Republicans’ 2.0 effort “looks to be just as destructively tilted toward the wealthiest 1 percent as the original.”

In a statement, the California Democrat accused the GOP of wanting to further explode the deficit “so they can force devastating cuts to Medicare, Medicaid and Social Security.” 

Despite Democratic leaders signaling they’d urge their caucus to oppose the 2.0 plan, Byrne predicted some Democrats would support it.

“I hear from some of my Democratic colleagues that they’d like the chance for a do-over,” he said. “And this would give them a chance for a do-over.” 

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