Mitch McConnell just set up a big showdown between GOP lawmakers and Trump over taxes

Senate Majority Leader Mitch McConnell on Tuesday drew a line in the sand during that could set up a showdown between GOP leadership and President Donald Trump on taxes.

McConnell told Bloomberg TV that he does not think any tax reform plan should increase the federal deficit, a principle that stands in contrast with Trump’s outline for reform.

“It will have to be revenue-neutral,” McConnell said of possible tax cuts, citing the country’s “$US21 trillion debt” as the reason.

Treasury Secretary Steven Mnuchin told reporters after the release of the one-page Trump tax outline last month that the plan would pay for itself through increased economic growth. Trump told The Economist in an interview that the tax plan would likely increase the deficit in the short-term to “prime the pump” for more economic growth.

The idea of a deficit-neutral tax plan has been favoured by most Republican leaders, including McConnell, House Speaker Paul Ryan, and House Ways and Mean Committee Chair Kevin Brady.

Republicans consistently brought up concerns with the increasing federal debt under President Barack Obama, with the loudest cries coming from conservative members of Congress. Trump’s approach to deep tax cuts without corresponding adjustments to spending could be a non-starter for many GOP lawmakers.

With Democrats likely in universal opposition to the plan, Republicans in both chambers would have to be nearly unanimous in their support of any bill for it to pass.

McConnell also downplayed the possibility of including a border adjustment tax to any plan. The BAT is a controversial tax that would in theory favour exporters and penalise importers. It has been attacked by retailers and some Senate Republicans, which led McConnell to say the “prospects of that would be rather bleak.”

McConnell also told Bloomberg that he has no deadline for tax reform to be passed.

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