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Financial Planning > Tax Planning > Tax Reform

Bob Corker Is Just the Beginning of Trump's Tax-Cut Problems

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A caustic feud with Sen. Bob Corker is just one obstacle President Donald Trump faces in uniting Republican senators around his goal of delivering what he’s called the biggest tax cuts ever.

Trump faces ideological demands from Sen. Rand Paul of Kentucky and procedural demands from Sen. John McCain of Arizona. He’s got a wildcard in Alabama Senate front-runner Roy Moore and perennially difficult votes like Sen. Susan Collins of Maine and Sen. Lisa Murkowski of Alaska.

Republicans hold a slim 52-seat majority in the Senate, so the White House can only afford to lose two GOP senators before tax legislation unravels under the special fast-track procedure Senate leaders plan to use — unless Trump can convince Democratic senators to support the effort.

(Related: 7 Ways the New Tax Fight Could Hit Annuities)

Trump on Wednesday framed tax reform as a partisan issue that’s needed to keep the stock market and jobs growing “by leaps and bounds.” “The Democrats want MASSIVE tax increases & soft, crime producing borders,” he said on Twitter. “The Republicans want the biggest tax cut in history & the WALL!”

Speaking to reporters Tuesday in the Oval Office, Trump said he would be “adjusting” his tax plan over the next few weeks “to make it even stronger.” White House Press Secretary Sarah Huckabee Sanders said in the afternoon that she had no adjustments to offer “at this time” and that “key principles remain the same.”

Corker has insisted that a tax cut must not add a penny to the deficit or “there is no way in hell I’m voting for it.” The president’s persuasive powers may also be limited after he escalated their feud Tuesday by labeling the retiring senator “Liddle’ Bob Corker” and a “fool” on Twitter. Corker had tweeted that the White House has “become an adult day care center.”

Still, the Tennessee budget hawk has left himself wiggle room, even though the size of the revenue loss contemplated in a Senate budget resolution is as much as $1.5 trillion. He says he’s open to using a maneuver that would ease some of the perceived deficit impact — and willing to consider “reasonable” growth that might result from tax changes. Corker even signaled last week that he may be open to using a different scorekeeper to evaluate the plan, rather than the traditional referee, the Congressional Budget Office.

Other senators have different objections or demands — showing just how hard it will be for tax legislation to clear the Senate. They are:

Rand Paul

Paul, the Kentucky libertarian who helped thwart a Trump-backed bill to replace the 2010 Affordable Care Act, has criticized the GOP tax framework as one that “hits the middle and upper-middle incomes with a solid tax hike” due to the elimination of tax breaks. While studies have shown most middle income people would see a tax cut, Paul views any middle-class tax hike as unacceptable.

That’s a tall order — and a categorical promise GOP leaders have avoided making. The framework’s call to scrap the state and local deduction and dependent exemptions is projected by the nonpartisan Tax Policy Center to raise taxes on at least some middle-class Americans. House GOP leaders have dismissed that finding, saying it doesn’t factor in unspecified details like how much the child tax credit will be increased by and where income brackets will be set.

Sen. John McCain, R-Ariz. (Photo: McCain)

Sen. John McCain, R-Ariz. (Photo: McCain)

“What I will not accept is a tax hike on the middle and upper middle class, sacrificing their paychecks on the altar of ‘reform,”’ Paul wrote in a Forbes op-ed.

Appeasing the Paul flank of the party means steeper tax cuts that could risk alienating the Corker wing by adding to the deficit. That’s the sort of tightrope Trump and his allies will have to walk to placate tension between competing factions among congressional Republicans. They have more breathing room in the House, where they can afford to lose 22 members and still pass a bill.

Two Mavericks

John McCain, the self-styled maverick who voted against Republican-pushed tax cuts in 2001 and 2003 due to deficit concerns, may also prove a difficult vote to corral. He demonstrated his willingness to deal Trump a defeat in the health care debate, and he has said he’d like to see a regular-order process for a tax bill with bipartisanship.

A different kind of maverick may join the Senate before year’s end. Roy Moore, the party’s rabble-rousing Senate nominee in Alabama, is the front-runner to win a special election slated for Dec. 12.

The former state Supreme Court justice has staked out a hard-line position on taxes. His campaign website calls for the eliminating of income taxes and instead imposing a flat tax on goods and services purchased. If elected, he has vowed to go to war with Senate Majority Leader Mitch McConnell, prompting worries from leadership that he won’t be a team player.

Unlike Trump-endorsed incumbent Sen. Luther Strange, whom he defeated, Moore has earned a reputation as someone who would make trouble in Washington. Last year, he was suspended for ordering judges to enforce the ban on same-sex marriage despite it being ruled unconstitutional.

Collins, Murkowski

Another challenge is Collins, the most moderate member of the GOP, who is expected to announce on Friday whether she’ll run for governor of Maine next year. Collins has previously voted against a repeal of the estate tax, one of Trump’s priorities. The loss of the state and local tax break also would hit Maine more than other states.

Last week, Collins declined to offer any thoughts on the unified framework. “It’s still a work in progress,” she said.

And then there’s Murkowski, another independent-minded Republican who helped thwart Obamacare repeal. She isn’t facing re-election until 2022, relieving her from political pressure for the foreseeable future.

Collins and Murkowski were pivotal votes in scuttling the Trump-backed Obamacare legislation that Republicans tried to pass in the Senate last month.

Heller, Flake

Two Republican senators also in the spotlight are Dean Heller of Nevada and Jeff Flake of Arizona, who are seen as the most vulnerable Republicans facing re-election next year. Heller, who ran into trouble at home for early opposition to a health care overhaul, appeared at a photo op introducing the tax framework on Sept. 27. Flake, meanwhile, faces a tough 2018 primary after his repeated and stinging criticisms of the president.

“I don’t know of a single Republican senator who defends the status quo tax code,” House Ways and Means Chairman Kevin Brady said Tuesday, when asked about the GOP’s narrow margin in the Senate. “So I fully expect each of those 52 Republican senators to weigh in in a positive way and deliver tax reform.”

Whether Trump’s feuds with senators like Corker will come back to haunt his tax agenda remains to be seen, but there’s no doubt it doesn’t advance the goal.

“Can’t be helpful,” said Jon Traub, a former Republican staff director for the tax-writing House Ways and Means Committee who runs tax policy at Deloitte Tax LLP.

—With assistance from Steven T. Dennis.

— Read GOP Framework Would Raise Taxes for Many of Your Clients on ThinkAdvisor.


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