As we watch the GOP go to war with itself over health care repeal, a second divisive legislative battle is waiting in the wings: tax reform. Once again, one of the key questions is cost and how much Republicans are suddenly willing to shelve their mantra of "fiscal discipline" in order to provide major tax savings to wealthy Americans. Should they restrict themselves to "revenue-neutral" cuts which Paul Ryan and Mitch McConnell say supposedly won't add to the deficit? Or as Donald Trump might favor, should they offer the world—and worry about the price tag later? Richard Rubin writes:
“Revenue neutrality shouldn’t necessarily be a constraint,” said Sen. Pat Toomey (R., Pa.) “The primary goal should be maximizing growth and thereby increasing the income for Pennsylvania families.”
Others, such as Sens. Rob Portman of Ohio and Chuck Grassley of Iowa, back the revenue-neutral target, which gives Republicans a counterargument to Democratic complaints that they stop caring about budget deficits when they want to cut taxes.
“To build a coalition here in Congress to get this done we’re really going to have to do it in a fiscally responsible manner,” said Rep. Carlos Curbelo (R., Fla.). “As a 37-year-old member of Congress I don’t support adding endless amounts of debt to my generation and younger generations.”
Some built-in restraints do already exist. Any legislation that leaves a budget deficit more than a decade later would require 60 votes to pass, meaning Democrats would have to sign on. If Republicans stick to a revenue-neutral plan, then they can pass it through the Senate on their own with a simple 51-vote majority. The other possibility is blowing a hole in the budget with tax cuts that sunset after 10 years, just as George W. Bush’s 2001 and 2003 tax cuts originally did.
None of this even takes into account the fact that Paul Ryan's original "revenue-neutral" plan from last year depends on the rather rosy projection of an annual 3 percent increase in economic growth. The other wild card is Ryan's new border-adjustment tax on imported goods, which would help make up for the decrease in tax revenue but will inevitably require buy-in from GOP lawmakers in states that stand to lose money based on the new tax.
Bottom line, there's still a constellation of hurdles that could kill the tax reform twinkle in Republicans' eyes. They need one of three things: the help of Democrats, who won't back across-the-board cuts for wealthy Americans; Republican lawmakers to coalesce around a revenue-neutral plan that Trump likely won’t favor; or the sunset option, which allows a party-line vote on a plan that stands to balloon the debt.
Sen. Tim Scott (R., S.C.) said he was willing to take the “calculated risk” of cutting taxes without fully offsetting the revenue loss and setting a 10-year expiration date.
“There’s no question in my mind that the growth in the economy will wipe away all fears and concerns,” he said. “But I’m not sure we have 51 votes for that approach.”