Trump predicts GOP will soon produce 'perfecto' tax bill compromise

    President Donald Trump walks up the steps of Air Force One at Andrews Air Force Base in Md., Saturday, Dec. 2, 2017. Trump is heading to New York to attend Republican fundraisers. (AP Photo/Susan Walsh)

    President Donald Trump predicted Tuesday that House and Senate Republicans will be able to hammer out a compromise between their tax reform bills “pretty quickly” and get “something where everything is perfecto” on his desk soon.

    The Senate narrowly passed its tax bill early Saturday morning, and the House version was passed a couple of weeks ago. Late Monday, House leadership selected members to participate in the conference committee that will attempt to combine the two into one bill that can pass in both chambers.

    “I call it the mixer. It’s a conference where everyone comes together, they pick all the good things and get rid of the things they don’t like,” Trump explained in brief comments to the press during a meeting with Republican lawmakers at the White House.

    Experts expect Republicans will find common ground relatively fast, if for no other reason than because they have given themselves no other choice.

    “Overall, there’s no real difference in that the House and Senate desperately want to pass this bill and they are going to get to yes whatever it takes,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

    MacGuineas added that there are real policy differences between the two that merit analysis, hearings, and debate, but “that process hasn’t taken place for this tax bill in any detail.”

    “Critics be damned, impacts be damned, and speed be damned, its full steam ahead,” said Scott Talan, an assistant professor of public strategy and communication at American University and former mayor of Lafayette, California.

    With control of both chambers of Congress and the White House, the worst-case scenario for Republicans at this point would be to walk away from these negotiations emptyhanded, especially after failing to repeal the Affordable Care Act over the summer.

    “If you can’t do it, then there’s no reason for you to be in [office]. It just shows they can’t do anything and paints them as sort of political failures,” Talan said.

    Trump pitched the legislation Tuesday as “a tremendous bill for jobs and for the middle class,” but critics say its benefits primarily go to the wealthy and corporations and its impact on federal tax revenue will inevitably result in cuts to social programs and entitlements.

    The broad strokes of the House and Senate bills are similar: a 20 percent corporate tax rate, rate cuts for most individuals, elimination of most deductions, and a total cost of around $1.5 trillion over ten years. Some of the specifics could create significant roadblocks for the process.

    Perhaps one of the easiest to resolve is the inclusion of a repeal of the Affordable Care Act’s individual mandate penalty in the Senate bill. House Republicans have supported repeal in the past and Rep. Kevin Brady, R-Texas, one of the leaders of the conference committee, said Tuesday he expects it to be in the final version.

    Both bills approximately double the standard deduction for individuals and married couples. The Senate bill retains seven tax brackets and lowers the top rate to 38 percent, while the House version pares the code down to four brackets but leaves the top at 39.6 percent.

    The cuts for individuals in the Senate are temporary and the cuts in the House are permanent, but both make corporate rate cuts permanent. Republican senators say sunseting the individual cuts in 2025 is necessary to comply with procedural rules in the upper chamber, and they insist a future Congress will likely extend them.

    “I would have said that’s a big issue except they have to require [expiration] in order for the Byrd rule to work in the Senate,” MacGuineas said.

    Due to united Democratic opposition, Republicans in the Senate used the reconciliation process to pass their legislation with a simple majority and avert a filibuster. This placed strict limits on the provisions allowed in the bill and the costs they can incur.

    Coupled with all of the other changes, permanent cuts for both corporations and individuals would be too expensive, so the House may have to accept the Senate version of that provision. However, MacGuineas said leadership should not expect House conservatives to roll over on every contested point.

    “The House does not like having the Senate cram final decisions down its throat,” she said.

    Other issues to be resolved include the estate tax and treatment of pass-through business income. Republican leaders have sought to downplay their differences, and Randall Holcombe, a professor of economics at Florida State University and onetime economic adviser to former Florida Gov. Jeb Bush, said they really are not that far apart.

    “The two bills are very similar, so I don't anticipate any difficulties in their reconciling them soon,” he said.

    Neither version significantly alters the structure of the personal tax code and both would greatly reduce the number of people who itemize deductions so the elimination of many of those breaks may not generate steadfast opposition. On corporate taxes, both represent a massive departure from the current tax code but they already have much in common.

    One complication that has emerged is a last-minute change to the Senate bill that preserved the corporate alternative minimum tax. Businesses have warned leaving that in place while slashing the regular corporate tax rate could greatly reduce research and innovation.

    House Majority Leader Kevin McCarthy, R-Calif., told CNBC Monday that the corporate AMT “has to be eliminated,” but keeping it gave Senate Republicans an estimated $40 billion in savings to offset other cuts.

    Any compromise could require concessions by some GOP lawmakers who have proven inflexible in the past. On the House side, the conservative Freedom Caucus has frequently demonstrated a willingness to grind legislation to a halt to get what they want and could push back against changes.

    In the Senate, where Republicans have only a two-vote majority, one of the three GOP senators who sank health care reform is still on the fence about tax reform. Sen. Susan Collins, R-Maine, has said she voted for the Senate bill Saturday after getting assurances that two pieces of legislation she supports to stabilize health insurance markets would get consideration.

    Some House Republicans have already balked at that prospect.

    “I think this is exactly what the American people are sick of: learning about trading votes to modify the healthcare system and one fifth of the economy in exchange for a tax vote,” Rep. David Brat, R-Va., a member of the Freedom Caucus, told the Daily Beast.

    Collins told NBC Sunday she is waiting to see what comes out of the conference committee before deciding whether to support the result.

    Sen. Bob Corker, R-Tenn., was the only Republican to oppose the Senate bill, citing concerns about the federal debt. If he again votes against the final legislation—which MacGuineas said is unlikely to be more fiscally responsible—they can only afford to lose two more senators and still pass the bill with Vice President Mike Pence as the tiebreaking vote.

    Democratic strategist Scott Ferson noted that Collins and the others who opposed the health care bill have faced little consequence for doing so, other than angry tweets from the president. Holding out on tax reform may have gotten them what they wanted, but it also created new complications.

    “When you’re trying to horse-trade to get the votes, to get the win, it’s the final hours where the bad decisions are made,” Ferson said.

    According to Talan, each senator who was on the fence over the bill faces unique circumstances, but they ultimately have to look at whether the policies on balance are better or worse than current law, especially if passage is a seemingly foregone conclusion.

    “Do you want to say you were part of tax reform or were you on the losing side that failed to stop it?” he said.

    While Republicans have seen successful tax reform as a political necessity and Trump insisted Tuesday that the bill is “so popular,” the legislation is widely opposed among the general public. According to a Gallup poll released Tuesday, only 29 percent of Americans currently approve of the proposed changes to the tax code.

    While 70 percent of Republicans approve based on what they have read or heard about the bill, only 25 percent of independents and 7 percent of Democrats support the changes. Nearly 15 percent of Republicans and 20 percent of independents are still undecided.

    Gallup pointed out that Ronald Reagan’s 1986 tax cut plan only polled at 39 percent approval at the time, but disapproval of the current proposal is higher and more intense.

    A recent poll conducted by Public Policy Polling for a liberal group opposed to the bill offered more bad news. In six key districts where House Republican incumbents are vulnerable in 2018, opposition ranged from 50 to 58 percent and about 60 percent of respondents or more said the bill favors the wealthy.

    Republicans are hoping opinions shift once the public learns more about the bill. Strong economic growth and continued improvements in the job market in 2018 could also overshadow concerns critics have raised about the long-term repercussions of these changes.

    “If the jobless rate is 3.7 percent on Election Day 2018 and wage growth is accelerating (both possible), [it's] tough to sell tax cut as killing America,” tweeted James Pethokoukis, a fellow at the American Enterprise Institute.

    Some Democrats are unconcerned about that prospect and unconvinced that Republicans in Congress believe the rhetoric they are selling.

    “The Republican tax bill is a far more egregious political mistake for Republicans in 2018 than Obamacare was for Democrats in 2010, who at least thought that the ACA was good policy,” said Democratic strategist Craig Varoga. “I’ll bet anyone, donuts to dollars, that Republicans think this tax bill is both bad policy and deeply unpopular, and are voting for it for the cynical purpose of getting the high-dollar beneficiaries of this bill to fund Republican super PACs, campaign committees and individual candidates.”

    Ferson cautioned against reading too much into the numbers right now.

    “We hate the unknown,” he said of the American public. “We hated the ACA until they were going to take it away from us.”

    A Christmas deadline for tax reform may seem arbitrary, but Ferson said Democrats’ difficulties with the ACA illustrate why both parties try to get big things done quickly.

    “It gets harder every day it doesn’t get done,” he said.

    According to Holcombe, public opinion on tax reform will eventually be shaped by how people feel the bill affects their own finances.

    “Some individuals might not like the reform if it imposes costs on them--people with huge mortgages, for example--and some might really like it if it lowers their tax bills, as will be the case with many middle- and lower-income Americans who will benefit from the larger standard deduction,” he said.

    Corporations are watching the legislative process more closely and have been more supportive of the proposed changes.

    “They hire lobbyists and have a heavy presence in Washington, which gives them more influence,” Holcombe said. “Congress is aiming the major tax reform at corporations because they are the ones who are paying attention.”

    As much as anything else, Talan said the rush to pass the bill is a reflection of the unpredictability of President Trump and what he may say or do from day to day or hour to hour.

    “The future is uncertain. For now, Republicans control the Senate, the House and the presidency. A month from now, things could look so different that it makes all other predictions and plans go out the window,” he said.

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