- Chip Somodevilla/Getty Images
The Republican tax bill, which House Republicans insisted would be released on Wednesday, will not be released on Wednesday.
It will be released on Thursday. Maybe.
What’s the holdup? According to Politico:
“Not 24 hours before the bill’s big reveal, lawmakers had yet to settle on one of the most sensitive questions of all: how to pay for their proposed $5.5 trillion in tax cuts, since any major revenue-generator is certain to antagonize some powerful lobby or group of lawmakers who could defeat it.”
Oh, that little issue!
The Republican “tax framework” announced last month was full of blanks and asterisks, so people could imagine whatever completions to those provisions that would make them happy. As they’re now learning, you eventually have to fill in those blanks, and whatever you write will upset people.
Republicans have committed to a budget resolution that allows them to grow the budget deficit by only $1.5 trillion over 10 years. And as Republicans strive to fill those blanks in a way that lets them fit over $5 trillion in tax cuts into that $1.5 trillion box, they have to make a bunch of very unpopular choices that threaten the coalition they’ll need to pass the bill.
Haven’t we seen this movie before?
The questions Republicans have yet to answer are not small
Some of the unresolved issues listed in Politico’s useful rundown are going to be really, really hard to resolve:
- Republicans don’t yet know what they’ll do about the state and local tax deduction. Repealing this provision is supposed to raise $1.3 trillion over a decade – it’s crucial to financing the overall package – but members from blue states hate it, and it’s one of the provisions driving tax increases for middle-class and upper-middle-class households. They haven’t yet settled on an approach to “guardrails” restricting the use of their proposed 25% tax-rate cap on income from pass-through businesses. This provision sounds technical, but it’s ripe for abuse, and the way it’s designed could change the cost of the whole tax package by hundreds of billions of dollars. I wrote last week about why all the design options for the guardrails are unappealing. Some House Republicans are still clinging to the idea of imposing new limits on 401(k) retirement-account contributions. This probably wouldn’t change tax receipts very much in the long run, but it would shift some revenue that would otherwise come far in the future into the immediate decade, which would help Republicans make the tax math add up within the 10-year window used for congressional budgeting. That’s why they can’t quit this idea despite its political toxicity – and despite President Donald Trump promising not to touch 401(k)s.
These are not small, trivial details. As with promises to “protect preexisting conditions,” Republicans are learning that the gap between rhetoric and legislative reality can also mean a gap between theoretical support and legislative passage.
- Drew Angerer/Getty images
Failure to plan is not the only repeated mistake
What other healthcare-politics errors did Republicans commit again? There are a few:
- They thought it would be easy. Republicans acted as though tax reform would be simple enough to do in a few weeks, and they’re now discovering it involves answering a lot of complex questions, where getting to the wrong answer can cost a lot of money and alienate important political constituencies. Remember when Trump was shocked to learn that healthcare could be so complicated? Turns out, tax reform could be so complicated, too. They overpromised. On healthcare, Republicans promised lower government spending, lower deductibles, better plans, and more coverage – an impossible combination. On taxes, they have promised big middle-class tax cuts, big tax cuts for the rich, big tax cuts for business, and no more than $1.5 trillion in budget-deficit increases – an impossible combination. They prioritized the donors over the voters. Republicans seem most wedded to the tax cuts that skew most toward the rich: a sharp cut in the corporate tax rate, a “small business” tax cut that’s actually a giveaway for people whose finances resemble Trump’s, and the repeal of the estate tax. The need to make room for all those tax cuts for the rich led them to write a plan in which 25% of families would see a tax increase by 2026, the Tax Policy Center has found. This is a flashback to healthcare, wherein Republicans consistently treated spending cuts as their most important promise and set about breaking others – for example, kicking millions off health insurance instead of providing the “insurance for everybody” that is “much less expensive and much better” that Trump said he would provide. In each case, they paid attention to the demands of the rich and chose to screw over the masses – and the masses cast a lot more votes.
Republicans face more ugly choices ahead
- Drew Angerer/Getty Images
To hit the $1.5 trillion deficit target and deliver all those tax cuts for the rich, Republicans are going to have to screw over a lot of people besides the homebuilders they’ve already upset.
Republicans are digging under the couch cushions – other people’s couch cushions.
Colleen Murphy, a tax reporter for Bloomberg BNA, reported on some revenue-raising ideas, besides the lower 401(k) limits nobody asked for, that she says are being discussed by tax writers in the Senate: a new tax on colleges’ endowment income, changes to the way life insurers are taxed, and a new excise tax on high salaries of nonprofit executives.
A Senate Finance Committee representative provided Murphy a statement that did not address whether the committee was considering these provisions.
These ideas may have merit in theory, but they also create new political problems. For example, a tax increase related to life insurance would be sure to draw new opposition from an industry (life insurers) and a public constituency (life-insurance-policy holders) that didn’t have reasons to oppose this tax bill.
Republicans have forgotten what they knew in the Bush era
Republicans have not had a major legislative achievement since the law creating the Medicare prescription-drug benefit in 2003. Partly, that’s because they’ve lost the House Majority Leader Tom DeLay and everyone else who actually knew how to move a contentious piece of legislation through Congress.
And it’s partly because Republicans forgot that a key to legislating successfully is to propose popular things.
A Medicare drug benefit was popular, as were other key initiatives of George W. Bush’s first term in office: across-the-board tax cuts and a major expansion of the federal role in K-12 education.
Bush’s presidency started going off the rails politically in 2005 when he bear-hugged the unpopular issue of Social Security privatization. (Contrary to popular belief, Bush’s polls fell steadily through 2005, not just in reaction to Hurricane Katrina.)
Since 2005, Republicans have been able to win by capitalizing on Democrats’ unpopularity, but they’ve forgotten how to do policy. That’s why healthcare was such a debacle.
And it’s why they can’t write a tax plan that people won’t hate.
Correction: An earlier version of this article incorrectly described a report from a Bloomberg BNA reporter about tax changes that may be considered in the Senate Finance Committee. These changes would impose a limit on the reserves for future insurance payouts that life insurers could deduct from their taxable income. They do not relate to the taxation of investment income associated with whole life-insurance policies.