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Warning signs emerge in GOP's tax reform push

The Hill logo The Hill 10/6/2017 Jordain Carney and Naomi Jagoda
Warning signs emerge in GOP's tax reform push © Provided by The Hill Warning signs emerge in GOP's tax reform push The GOP's push for tax reform legislation is showing some early signs of trouble.

With Republicans pivoting to their second big agenda item, leadership is facing a familiar dynamic: Divisions among members, competing demands and no room for error.

Republicans have failed to score a major legislative win this year despite having the first unified GOP government in a decade.

And they're under intense pressure from both supporters and outside groups to meet their self-imposed deadline of passing tax reform this year. The move would hand the party a major accomplishment to tout heading into the 2018 election.

Both the House and Senate took steps this week toward that goal. The House cleared its 2018 fiscal year budget, with 18 Republicans joining Democrats in voting against it. Meanwhile, the Senate Budget Committee advanced its own measure along party lines.

The fiscal blueprint will unlock a procedure allowing Republicans to bypass a filibuster and pass tax legislation through the Senate with 51 votes.

But key lawmakers are warning that while the budget is a necessary first step, they still have a long way to go before getting a bill to President Trump's desk.

Sen. Orrin Hatch (R-Utah) says Republicans must do whatever it takes to make good on their years-long tax reform pledge.

"Some have said that tax reform is a do or die moment for the GOP. I wholeheartedly believe that. Not just because we might lose an election. .... [But] Republicans have promised for some time now that we will deliver meaningful, comprehensive tax reform," said Hatch, who will be central to crafting the GOP tax plan.

Republicans in the Senate face a particularly perilous path to passing tax legislation. With a razor-thin 52-seat majority, they need to win over at least 50 senators, allowing Vice President Mike Pence to break a tie.

The most vocal Republican skeptics of the tax plan in the Senate are GOP Sens. Bob Corker (Tenn.) and Rand Paul (Ky.), who are drawing redlines that could toughen leadership's path to finding consensus.

Corker, a fiscal hawk who is retiring after 2018, has vowed he won't vote for "one penny's worth of deficits."

"I want to tax reform to reduce the deficit," he said, asked about his stance on the tax plan. "I want it to be pro-growth and I want it to be permanent."

The Senate budget resolution would allow the tax plan to cost the government $1.5 trillion in revenue over the next decade, though advocates argue it would be made up for through economic growth unleashed by corporate and individual tax cuts.

But an analysis from the Tax Policy Center, which didn't factor in economic growth, warned that the framework Republicans released last week would add about $2.4 trillion to the deficit in 10 years, and another $3.2 trillion in the second decade. Republicans blasted that study as biased and said it made unfair assumptions.

Meanwhile, Sen. Rand Paul (R-Ky.) - a libertarian-leaning Republican who rankled GOP leadership during the healthcare debate - is warning that the emerging tax plan will raise taxes on the middle class.

"I don't want to vote for a plan that cuts some taxes but raises them on others, especially not on the middle class. So I want everyone to see the errors in their plan, look for solutions, and come together for a plan that can pass," Paul wrote in a Breitbart op-ed.

Paul, while pitching his own potential tax solutions, added he's not trying to "dictate the details" and that there were parts of the plan that he likes, including that the top tax rate would be lowered.

But if Senate leadership can't win over Paul and Corker, they would face the herculean task of holding together every other member of their wide-ranging caucus, including firebrands like Sen. Ted Cruz (R-Texas).

Cruz, for his part, is warning his colleagues against setting hard demands as they try to find a path to 50 votes.

"You may have noticed in the Senate, we have a really narrow majority. 52 Republicans, and at this point, it's a little bit difficult to get 50 Republicans to agree on what time of day it is," he said at an event hosted by the National Taxpayers Union.

He added that it "dangerous ... for anyone to be in the business of drawing red lines. If we get too many red lines drawn in too many directions, this isn't going to get done."

Meanwhile, a core band of moderates that helped tank the ObamaCare repeal effort are keeping their powder dry as they wait to see the final plan.

Sen. John McCain (R-Ariz.), who has previously said that he wants tax reform to be bipartisan, said on Thursday that he's non-committal.

"I want to see what the whole package. That is not clear yet," he said.

McCain, the chairman of the Armed Services Committee, also wants a deal that would increase defense spending, but said that he wouldn't link getting a deal to his vote on the tax plan.

"Ten members of the USS McCain died and they're working 100 hour work weeks, how many here are working 100 work weeks?" he asked.

McCain voted against both the 2001 and 2003 Bush-era tax cuts, warning too many of the benefits went to top-income earners instead of the middle class. Democrats are aiming similar criticism at the current GOP tax framework.

Sen. Susan Collins (R-Maine) told Bloomberg late last month that she was taking time to study the plan.

Republicans, in an apparent bid to win over Sen. Lisa Murkowski (R-Alaska), included a line in the budget resolution that paves the way for drilling in the Alaska National Wildlife Refuge, which is favored by the GOP lawmaker. But Murkowski has still been mum on if that's enough to win her vote.

Over in the House, GOP leaders are trying to figure out how to address the concerns of lawmakers from high-tax states who are worried about the possible repeal of the state and local tax deduction (SALT).

Several blue-state Republicans discussed the state and local tax deduction issue with House Majority Whip Steve Scalise (R-La.), House Majority Leader Kevin McCarthy (R-Calif.) and House Ways and Means Committee Chairman Kevin Brady (R-Texas) on Thursday.

Rep. Pete King (R-N.Y.), who was at the meeting, said that lawmakers are "not close" on a solution yet, but "we're definitely working on it."

King thinks that the SALT deduction needs to either be retained completely or "as much as possible."

Brady, noting he's asked blue-state lawmakers about the tax burdens their constituents face, said that Republicans remain united on the goal of overhauling the tax code.

"No one in the House ... Republicans at least, are defending the current tax code, and everyone's tired of watching our jobs go overseas in a big way," he said.

Republicans are also pitching specific asks for a tax bill.

GOP Sens. Mike Lee (Utah) and Marco Rubio (Fla.) have joined forces with Ivanka Trump to push for a doubling of the child tax credit. Republican Study Committee member Rep. Jeff Duncan (R-S.C.) suggested that capital gains rates should be cut in tax reform; the framework is silent on the issue.

"That's why I keep stressing that this is much more difficult than health care, and if you're going to try to produce a product that matters and is real. ... It's going to take a lot of work," Corker said.

Pressed if he thought Congress has the "intestinal fortitude" to pass a bill, Corker quipped: "Well we'll have to see, won't we? Not a great track record."

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