Republicans rush to build support ahead of Senate tax debate
(Bloomberg) – Republican lawmakers are scrambling to lock up the votes need to finalize a tax bill that can make it to President Donald Trump’s desk by the end of the year, without the benefit of an important estimate of its possible economic benefits.
A new analysis by the non-partisan Congressional Budget Office released on Sunday estimated the extent that the bill would increase the federal budget deficit over a decade. But the CBO said it hasn’t had time to fully analyze the likely impact on variables such as economic growth or employment.
“I hope we can get it done by Christmas,” Senator Tim Scott of South Carolina said Sunday on ABC’s “This Week.” “If not, we’ll be here through Christmas, looking at the end of the year.”
Republican leaders in the Senate plan a make-or-break floor vote on their bill as soon as Nov. 30. Democrats are expected to try to delay or derail the measure, and Republicans must hold together at least 50 votes from their thin, 52-vote majority in order to prevail.
Senator Lindsey Graham said on CNN’s “State of the Union” that he thinks Republicans will have the votes.
“What they are concerned about is that the personal tax cuts expire in 2025, and that’s a bit of a gimmick. But we will get there, because failure is not an option when it comes to the Republican Party cutting taxes,” Graham said.
Fate of SALT
The House passed tax legislation earlier this month over the objections of Democrats and some Republicans from high-tax states such as New York and California, who were concerned about the potential end to federal deductions for most state and local taxes.
The Senate bill would end the so-called SALT write-offs, and the House bill would repeal deductions state and local income taxes while preserving the deduction for property taxes.
Representative Peter King, a Republican from New York’s Long Island, bemoaned the threat to SALT deductions. “I can see a mass exodus coming,” King said on Fox’s “Sunday Morning Futures” of his recent talks with business people in his district. “They are talking about moving their address to North Carolina, Florida, wherever.”
If the Senate measure passes -- a step that’s by no means guaranteed -- lawmakers in both chambers would have to hammer out a compromise between their differing bills, a process that presents potential pitfalls of its own.
Hefty Price Tag
For now, though, much of the Senate’s attention will focus on its legislation’s price tag.
Independent studies have found that the tax cuts won’t generate enough additional economic growth to pay for themselves. Both the Senate and House bills would reduce federal revenue over a decade by roughly $1.4 trillion, according to the Joint Committee on Taxation.
The CBO concurred with that assessment in its 11-page report on Sunday. It said the Senate bill would cut revenues by about $1.63 trillion and lower outlays by $219 billion from 2018 to 2027 -- for a net deficit increase of $1.4 trillion.
CBO analysts, however, said it was impossible to provide an estimate of the bill’s macroeconomic effects in such a short timeframe.
Staff are analyzing potential changes in economic output, employment, capital stock, and other variables, according to the report. “It is not practicable for a macroeconomic analysis to incorporate the full effects of all of the provisions in the bill, including interactions between these provisions, within the very short time available between completion of the bill and the filing of the committee report.”
Senator John Thune of South Dakota, a member of the Senate Finance Committee, pushed back on forecasts for a deficit blowout. A small up tick in economic growth “would cover the cost” of the tax cuts, Thune said on “Fox News Sunday.”
“All you have to do is get four-tenths of 1 percent of additional GDP,” Thune said -- but without a dynamic score, the claim can’t be verified.
On Wednesday, a report from the Penn Wharton Budget Model at the University of Pennsylvania said the Senate bill would cut federal revenue in each year from 2028 to 2033. That finding would mean it doesn’t comply with a key budget rule that Senate Republican leaders want to use to pass their bill with a simple majority over Democrats’ objections.
In essence, that rule holds that any bill approved via the fast-track process can’t add to the deficit outside a 10-year budget window. The JCT has already found that the Senate bill would generate a surplus in its 10th year because it has set several tax breaks for businesses and individuals to expire.
But the JCT hasn’t yet weighed in publicly on the revenue effects in subsequent years. Senate Republican leaders have expressed confidence that their proposal will, ultimately, satisfy the rule.
Trump is scheduled to address Senate Republicans at their weekly luncheon Tuesday on taxes and the legislative agenda for the rest of the year, according to a statement from Wyoming Senator John Barrasso, chairman of the Senate Republican Policy Committee.
Trump to Talk
The White House previously announced that the president would talk with Republican and Democratic congressional leaders at the White House the same day about an agreement on spending to keep the government open after funding expires on Dec. 8.
Meanwhile, the 2010 Affordable Care Act -- popularly known as Obamacare -- looms in the background. The law contains a provision requiring individuals to buy health insurance or pay a federal penalty. Removing that penalty in 2019, as the Senate tax bill proposes to do, would generate an estimated $318 billion in savings by 2027, according to the Congressional Budget Office.
The savings would stem from about 13 million Americans dropping their coverage, eliminating the need for federal subsidies to help them afford their health insurance policies. At least one Republican, Senator Susan Collins of Maine, has said it’s a “problem” for her to include the ACA individual mandate repeal in the tax bill.
The mandate repeal wasn’t part of the House bill and would be an element to hash out during a House-Senate conference. Top House tax writer Kevin Brady, chairman of the Ways and Means Committee, said Sunday there’s “sympathy” to the concept among members.
“The individual mandate does hurt many of those families who can’t afford, don’t want Obamacare,” Brady said on Fox. “We’re just encouraged the Senate’s acting.”