Trump throws a curveball as Republican leaders ready their massive tax reform package

  • Republicans are close to releasing their tax reform plan.

  • This week, Trump started courting Democrats to work on the package.
  • One Republican strategist said because the GOP is planning to use reconciliation to pass the legislation, Trump’s overtures are “unhelpful.”

Congress’ next big legislative push — tax reform — is about to take off. But in speaking to reporters and Democrats this week, President Donald Trump appears determined to shake up the Republican Party’s game plan before it even begins.

Possibly annoyed with how his other legislative initiative — healthcare — could not pass on a pure party-line vote and exuberant about how some of his recent bipartisan overtures have been portrayed in the media, Trump has sounded as if he’s ready to make a few concessions Democrats say are necessary in order to play ball on tax reform.

This week alone, Trump discussed tax reform with Democratic lawmakers at a trio of meetings. Following one with a bipartisan group of congressmen, Trump told reporters that “the rich will not be gaining at all with this plan” and that he thinks “the wealthy will be pretty much where they are.”

“If we can do that, we’d like it. If they have to go higher, they will go higher, frankly,” Trump said. “We’re looking at the middle class and we’re looking at jobs.”

Speaking with reporters aboard Air Force One later in the week, Trump pointed to how healthcare legislation was thwarted after Republican Sen. John McCain voted it down. He signalled that if Republicans aren’t a sure bet to stay unified in a policy matter, he’ll “have to do more and more” with Democrats.

“If [Republicans are] unable to stick together, then I’m going to have to get a little help from the Democrats and I’ve got that and I’ll tell you for the tax bill I would be very surprised if I don’t have at least a few Democrats,” he said, adding, “I do believe we’ll have some Democratic votes.”

Senate Majority Leader Mitch McConnell already said the reconciliation process — requiring just 51 votes — will be utilised to pass tax reform. In that scenario, Trump does not need any Democratic votes so long as the Republican front stays unified.

Trump’s comments on taxes not being lowered for the wealthiest Americans ran opposite of what his own Treasury secretary, Steve Mnuchin, said earlier in the week, when he noted that many wealthy Americans will get a tax break as a result of the proposal — which still has yet to be released, though Bloomberg reported that the target date is September 25.

Mnuchin said the only wealthy Americans who would not see such a break are those living in California and New York, which is a result of the deductions for state and local taxes being eliminated as a part of the GOP plan.

Senate Minority Leader Chuck Schumer, who discussed tax reform with Trump this week, said he opposes a bill that will repeal those state and local deductions as well as one that eliminates the mortgage interest deduction, another proposal that GOP leaders have discussed.

“You would affect people who live in high-tax states” by eliminating those state and local deductions, Howard Gleckman, a senior fellow at the Tax Policy Center, told Business Insider. “It’s become kind of a cliche to say those are Democratic states, but we’ve done an analysis that shows a significant number of Republican congressmen come from those states. So, I think it’s going to be much more difficult than they claim it’s going to be to eliminate the state and local tax deduction.”

“It’s something that they could do if they got the rates down low enough,” he continued. “But it’s also something I think is very unlikely.”

Meanwhile, it sounds as if Trump will also not get his desired 15% corporate tax rate — a decrease from the current rate of 35%. Sen. Orrin Hatch of Utah, one of the “Big Six” working on the tax reform legislation, said he sincerely doubts that Republicans will “be able to get to that level on the corporate tax rates” during an interview with CNBC on Friday, though he said he was working to possibly get there.

Republican strategist Matt Mackowiak, president of the Potomac Strategy Group, told Business Insider that it’s smart for Trump to negotiate with Schumer and House Minority Leader Nancy Pelosi on issues that “aren’t going to be done on a party-line basis, because there is a different threshold there.”

But for tax reform, “it appears they still intend to use reconciliation, which you would only need Republican votes” for, he said.

“So negotiating with Schumer and Pelosi on tax reform would be not only unnecessary but would be actually unhelpful,” he added.

Mackowiak added that Trump “feels like some of this bipartisan stuff has been very good for him the last 10 days.”

“And if worked on other issues, maybe it will work on tax reform,” he continued. “It could be that he’s not fully aware that this is really going to be almost entirely Republicans that will move tax reform.”

Another possibility in Trump’s thinking, Mackowiak said, is that he might be concerned that hardline conservatives in the House Freedom Caucus could block the legislation if it does not move far enough to the right.

Without a bill to dissect, however, the effects of Trump’s posturing with Democrats remains “a big question,” he said.

“It seems like this is heading to a decision point here on tax reform,” he said. “And if they are going to stay on the one-party path, which I generally think makes sense, then they’re going to need to worry about picking up conservatives, not picking up Democrats.”

In addition to scrapping the previously mentioned state, local, and mortgage deductions, Politico reported last month that Republicans are seeking to eliminate businesses’ ability to deduct interest while seeking to phase in full expensing for small businesses, which would allow them to deduct investments in new equipment or facilities immediately. That’s the core of a package that would allow the GOP to drop both corporate and individual rates, although it’s unclear just exactly how much they would be able to.

Ideas such as a border-adjustment tax were tossed around earlier this year, but have since been tossed aside.

Grover Norquist, the nation’s premier anti-tax activist and president of Americans for Tax Reform, said he’s a fan of where the effort is at, adding that he’s confident the plan will not be altered to include things that are unsupportable — a border-adjustment or value-added tax, or a carbon tax — for him.

“Because those would grow in such a way that they would negate all the pro-growth aspects that are in the original bill,” he told Business Insider. “Now, I’ve been assured by everyone in the ‘Big Six’ that neither of those are on the table, neither of those are ever happening. But that’s something I’d look at in the long term and say this is not better than nothing, even though it might look good in some areas, you have planted a seed in an Oak tree that will overshadow good stuff.”

“It’s like asking what would you like on a pizza for your pizza toppings other than shards of glass,” he continued. “I don’t care what else is going on the pizza, because it has shards of glass I’m not eating it.”

Trump’s recent overtures to Democrats haven’t included such items that Norquist compared to “shards of glass” on a pizza.

But as Hatch told CNBC on Friday, the parties involved are “trying to get on the same page.”

“It’s much harder than healthcare,” he added.

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