Congress returns from its mid-summer break Monday for a crucial three-week stretch that will help determine whether President Donald Trump can deliver on his promise of a historic tax cut.
Several obstacles await lawmakers, including an ongoing health care fight, divisions among Republicans on the basic parameters of a tax bill, and a maelstrom of upcoming deadlines to keep the government running and avert a catastrophic default on U.S. debt.
Republican leaders had hoped to spend July working on what House Speaker Paul Ryan has called a once-in-a-generation bid to overhaul the U.S. tax code. But the Senate remains bogged down with the president’s call for changing the Affordable Care Act. With no clear endgame for that effort, observers question the prospects for tax legislation, which can’t move procedurally until health care is off the agenda.
“The longer the health care debate drags out, the harder it’ll be to get to the finish line on tax reform,” said William Galston, a senior fellow at the Brookings Institution. “Health care and tax reform are linked in very concrete ways,” he said, in part because the Senate health bill, the Better Care Reconciliation Act bill, would establish a lower tax base by repealing a number of taxes imposed by the Affordable Care Act of 2010.
Meanwhile, House Republicans have been delaying consideration of a fiscal 2018 budget resolution, the vehicle they plan to use for tax legislation. Factions within the party disagree on whether tax rate cuts for individuals and businesses should be offset with new revenue or spending cuts, or just be allowed to add to the deficit. Debate among conservative and moderate Republicans has focused on how deeply they should cut “mandatory” safety-net spending.
“There’s a train wreck coming,” said G. William Hoagland, a senior vice president at the Bipartisan Policy Center in Washington and a former Republican staff director for the Senate Budget Committee. “I don’t see a tax bill in 2017 at all. Not at all,” Hoagland said. “Not comprehensive tax reform. No way.”
The Republican divisions are “too stark, too great” to pass a budget resolution before the new fiscal year starts in October, he said. Hoagland predicted lawmakers will have to settle for stopgap measures to keep the government open. “From my perspective and from past experience, we’re very late on everything right now.”
Treasury Secretary Steven Mnuchin (Photo: Treasury)
His pessimism stands in contrast to House Speaker Paul Ryan, whose office sent emails to reporters last week proclaiming that “Tax reform is happening. Not next year or next Congress. It is happening now, in 2017.” The legislation will be “transformational,” Ryan’s email said, not “some rinky-dink, watered-down version of reform.”
Lack of Clarity
Republican lawmakers and aides have privately vented that the lack of clarity from Trump on tax specifics has added chaos to the debate. The only public guidance the White House has released is a vague one-page blueprint in April that steered clear of tough questions like whether a tax cut should be paid for and how.
“We’re absolutely committed to getting tax reform done this year,” Treasury Secretary Steven Mnuchin said Sunday on ABC’s “This Week.” “Our plan is to have a full-blown release of the plan in the beginning of September, with being able to vote and getting this passed before the end of the year,” he said.
Mnuchin cited hundreds of meetings on the tax plan so far with House and Senate leadership, business leaders, and others. White House spokeswoman Natalie Strom added that the private talks are yielding progress, but decisions won’t be “hashed out in the press.”
The House Ways and Means Committee intends to hold two tax-overhaul hearings this month — though neither will involve marking up actual legislation. One will focus on benefits for small businesses, and another will explore benefits of simplifying the tax code for families and individuals, said the panel’s chairman, Rep. Kevin Brady of Texas.
Any more concrete discussions are taking place behind closed doors. Ryan and Brady, along with Senate Majority Leader Mitch McConnell and Senate Finance Chairman Orrin Hatch, have been meeting privately with top administration officials to try to agree on a path forward for tax legislation. Gary Cohn, Trump’s top economic adviser, has said officials intend to release a “unified” plan in early September.
By then, after a monthlong recess in August, Congress will have to pass a bill to keep the government funded, extend the Children’s Health care Program, and continue federal flood insurance — all by Sept. 30. Calls to cancel the August recess and keep working in Washington are growing within the Republican rank and file, but there’s no indication that party leaders will comply.
By the middle of October, Congress will also have to raise the debt ceiling, according to a recent report by the Congressional Budget Office. Past debt-ceiling votes have stirred opposition among many Republicans — a further division that may complicate the politics of a tax-overhaul vote.
Arthur Laffer, the supply-side economist and cheerleader for tax cuts, says he’s trying to remain optimistic. But as Congress returns to its messy health care debate, he worries that the issue has diminished the prospects for a tax bill.
Lawmakers should have just swiftly repealed Obamacare earlier this year with a delayed enactment — perhaps three or four years — and then moved on to taxes, Laffer said.
“Now they’re caught in it.”
— Read US Has Until at Least September to Lift Debt Cap, Analysts Say on ThinkAdvisor