President Trump on Wednesday will pressure Congress to pass a sweeping package of tax cuts by year’s end, but he is not planning to advance a specific plan.
His push comes as a divided Republican Party and a number of other external forces — including the devastation caused by Hurricane Harvey — imperil his bid for a major legislative achievement.
In a speech delivered to supporters in Springfield, Mo., Trump plans to make a populist argument for cutting taxes, saying it will help raise wages and boost economic growth, said senior administration officials who spoke on the condition they not be named.
One of the officials said Trump is going to try to tap into a view among many Americans that “the economy is rigged — that it only benefits a very small [number of] wealthy and well-connected few … The president is going to really hammer on that.”
So far, the president has not advanced any proposal that would — on net — raise taxes on the wealthiest Americans. While the officials said Trump is not planning to offer new details Wednesday, many he has offered in the past, such as cutting the estate tax and lowering rates on investment income, would likely lead wealthier Americans to pay less.
Republican congressional aides and several tax lobbyists said Tuesday there is no consensus within the GOP about how to proceed. But some lawmakers are now considering a package of both permanent and temporary tax changes that they hope can get enough political support, said Rohit Kumar, a former top tax aide to Senate Majority Leader Mitch McConnell (R-Ky.). Kumar, who is now leader of the tax policy services practice at PwC, said it has still not been decided what tax changes lawmakers will propose making permanent and which ones would only be temporary.
Lawmakers could decide to phase some tax changes in, phase some other tax changes out, or pass the law in a way that makes changes “sunset” after a certain number of years.
In the past, Democrats and Republicans have proposed cutting tax rates for a set number of years as a way to deliver short-term tax cuts while stopping short of permanently changing the tax code. White House officials have said they are open to temporary changes if they can’t secure enough support for long-term overhaul.
These are some of the many questions that remain unresolved as GOP leaders try to write the tax plan. Among the most pressing is whether the tax changes will increase the budget deficit, which would happen if any plan cuts tax rates without offsetting the lost revenue by eliminating certain deductions.
“The big issue that overrides all of this is whether this is going to be a tax cut and who is going to get the cuts,” said Michael Mundaca, a former top tax policy official in the Obama administration who is now co-director of the national tax department at Ernst & Young.
Asked about this last week, McConnell alluded to it being an issue, saying “There’s some internal debate about that that we’ll have to sort out among ourselves.”
A tax overhaul is one of several items competing for Congress’s attention, and while the White House and GOP leaders plan to continue negotiating, they’re confronting a daunting fall political calendar.
Congress is only scheduled to be in session for brief periods in September, and they must also reach an agreement to prevent a government shutdown by October and pass a bill to suspend the debt ceiling before Sept. 29. Congress also must decide whether to reauthorize a government flood insurance program and a health-care program for low-income children.
And amid catastrophic damage from Hurricane Harvey, Trump has promised Texas and Louisiana “billions” of dollars in disaster relief funds, money that will have to be appropriated by Congress. Trump said Tuesday that “there’s probably never been something so expensive in our country’s history,” suggesting the request for emergency federal funding could be sizable.
With all these political decisions looming, Trump is focusing on his tax cut idea, which he sees as central to his domestic agenda.
He wants to sharply reduce the corporate tax rate from 35 percent to 15 percent, cut tax rates paid by individuals and families, and eliminate other taxes that his advisers believe complicate the code.
To raise revenue that would offset some of these cuts, the White House and Republicans are looking at curbing numerous tax deductions. For example, they have proposed to block people from deducting the state and local taxes they pay from their federal tax bill. And they are also looking at capping the amount of mortgage interest people can deduct from their income, though they haven’t yet decided how to proceed.
The White House had hoped to have the entire tax cut plan passed by Congress before August, but disorganization and numerous delays pushed their deadlines back. The White House had hoped to write a tax bill jointly with the House and the Senate, but that idea was also scrapped in favor of letting each chamber of Congress move on its own schedule.
Now, congressional Republicans hope they can begin debating the tax changes in earnest in October, when some members of the House Ways and Means Committee aim to advance a bill. If successful, the House could take that bill and vote on it sometime in November, with the focus then shifting to the Senate.
But the bill likely can’t become law unless the House and Senate pass matching budget resolutions. This is a crucial step because passing matching budget resolutions would allow the Senate to pass tax changes with a simple majority of votes. If they don’t pass the budget resolutions, the Senate will need 60 votes to pass any tax changes, something that is more difficult because Democrats could mobilize to block any plan. Republicans only control 52 of the 100 Senate seats. Neither the House nor the Senate has voted on a budget resolution yet, in part because of complaints from House conservatives that Republicans aren’t doing enough to cut spending.
As the White House relies on House and Senate lawmakers to hash out details of the bill, top administration officials are spending more time traveling around the country to try to build consensus, something they didn’t do as frequently during the failed effort to repeal the Affordable Care Act. There are signs that these visits could bear fruit. Trump and McConnell have a strained relationship, in part because of the failed health-care vote, but Treasury Secretary Steven Mnuchin visited McConnell in Kentucky last week and they jointly pledged to work together on the tax cut plan.
Similarly, Mnuchin was in Nevada on Monday visiting Sen. Dean Heller (R-Nev.) and business executives. Heller raised numerous concerns about the health-care repeal effort, but he seemed much more enthusiastic about the tax changes. His support would be crucial, as he is a member of the tax-writing Senate Finance Committee.
And even Trump’s visit to Missouri on Wednesday is showing signs of making a political impact. Sen. Claire McCaskill (D-Mo.) has raised concerns about the White House’s initial tax-cut plan, but on Saturday she said she saw an opening for working with the Trump administration on the effort.
“This is an area on which I’m optimistic President Trump and I will find common ground,” McCaskill said. “I’ve talked in a lot of my town halls about my support for simplifying the tax code by cleaning out loopholes and goodies for special interests, and lowering the corporate tax rate — as long as we’re doing it all through the lens of strengthening Missouri’s working families.”
McCaskill is up for reelection in November in a state that overwhelmingly supported Trump in the 2016 elections.