The GOP’s tax reform framework is already getting pushback from within the party.
- Republicans in Democratic states are worried about eliminating the state and local deduction.
- Budget hawks are worried about additional debt from the plan.
It’s been less than a week since President Donald Trump and the “Big Six” Republican tax negotiators rolled out their unified framework designed to overhaul the US tax code. But it’s already facing potential stumbling blocks from the
With a slender majority in the Senate and the possibility of significant outside pressure, it appears that the GOP tax plan could have a bumpy road to Trump’s desk.
State and local taxes
Republican leaders have proposed ending deductions for state and local taxes from a federal tax bill, and they have faced early resistance from both sides of the political aisle.
The provision generally benefits people in higher-tax states, most notably New York, New Jersey, and California. Those three states receive roughly one-third of the benefits from the SALT deduction. They also happen to be states that generally favour Democrats.
Rep. Chris Collins, a Republican from New York, said he would be fine the SALT deduction disappearing because he liked the rest of the plan. But he appears to be the exception, not the rule.
New York and New Jersey Republicans in the House, such as Reps. Leonard Lance and Peter King, said they would oppose the current framework due to the SALT deduction elimination. Rep. Jeff Denham, a Republican from California, said he didn’t want the tax plan “to penalise Californians.” Others in states like Pennsylvania and Maryland could also face pressure from constituents over the deduction.
According to Bloomberg, leaders in the Republican Party are now considering simply modifying the deduction, such as adding caps to the amount that can be deducted, rather than scrapping it altogether.
The federal deficit
Another major concern for some Republicans is the possibility that the tax reform proposal could lead to new deficit spending.
Sen. Bob Corker of Tennessee has already laid out a clear position on the issue, saying he would vote against any bill that looks like it would add “even one penny” to the federal deficit.
“Are we folks who care about leaving this country better for future generations?” Corker told reporters. “Or are we all about ‘party-time’ here, to make ourselves beloved by people not having to pay taxes but throwing kids under the bus down the road?”
He has said, however, that he would accept a bill that does not add to the deficit under a “reasonable” dynamic scoring system — which factors in assumed tax revenue increases from faster economic growth.
Others like Sen. Mike Crapo of Idaho also raised eyebrows at the possibility of the deficit ballooning under the plan — most plans say the unified framework would add between $US2 trillion and $US2.5 trillion over 10 years — but have not gone as far as Corker.
Tax cut on the rich?
An analysis from the nonpartisan Tax Policy Center released late last week showed that the wealthiest 1% of Americans would see a significant majority of the proposal’s benefits, rallying Democrats and even GOP critics around a signature early talking point against the coming legislation.
Sen. Rand Paul of Kentucky attacked the framework in a tweet, citing the TPC study to argue the plan was a break for the rich.
Outside of Washington, details of the plan still rankle many Americans, despite an overall favorability rating for the plan in a Morning Consult/Politico poll.
The proposed cut to the corporate rate, to 20% from the current 35%, was only supported by about four-in-10 of those surveyed. Also, 41% said they believed the rich would pay less in taxes under the proposal, compared to just 28% who said they believed wealthier Americans would pay more.
It’s barely started
Trump, officials in his administration, and Congressional Republicans have stuck to a common refrain: that the tax plan will be passed in 2017. But one of their biggest hurdles is the calendar.
Congress still needs to pass a budget to open up the reconciliation process that allows the Senate to pass tax reform without the possibility of a Democratic filibuster. The Senate Finance and House Ways and Means committees still need to turn the nine-page proposal into a fully fleshed out piece of legislation. The two pieces of legislation then need to be passed, and any differences would trigger a conference committee process.
Add on the fiscal deadlines coming up at the start of December and the time crunch is severe.
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