House Conservatives Hold Budget Hostage Over Tax Plan Details

  • Freedom Caucus founder says he opposes border adjustment
  • Far right GOP demands answers from leadership on tax direction

EX-CBO Director on Budget Double Counting Mistake

Conservative House Republicans are threatening to vote against a budget deal unless it lays out details of a plan to overhaul the U.S. tax code -- including the specific tax rate that would be set for corporations.

Representative Mark Meadows, head of the right-wing Freedom Caucus, said the House should cancel or delay the planned August recess until there is agreement on “a set of principles” for the tax plan that President Donald Trump and congressional leaders have promised since shortly after his election. Those principles should include a decision on the unpopular border-adjusted tax that House Speaker Paul Ryan defends as a way to pay for cutting corporate and individual rates, Meadows said.

Congressional leaders have been meeting privately with top Trump administration officials on tax legislation, but they’ve released no details of their discussions. There have been few public signs of progress toward even basic decisions, like whether the tax legislation should be revenue-neutral. Gary Cohn, head of the National Economic Council, has said actual legislation won’t be ready until September -- though a White House spokeswoman said this week that officials expect to reach agreement on a framework for the bill by the end of July.

Republicans plan to use the fast-track budget reconciliation process for the tax bill to get around a potential Democratic filibuster in the Senate. Wednesday’s request from the Freedom Caucus is the strongest message yet that some rank-and-file members want to see the tax plan details before voting to adopt a budget resolution for the next fiscal year -- or leaving for August recess.

“Without decisions on tax reform, there will not be enough votes to pass it in the House because of the conservative concerns,” Meadows said of the budget, even if it includes cuts to mandatory spending that his group has demanded. The North Carolina lawmaker later said the tax information can be broad, but needs enough detail to show what the revenue numbers would be. “I think we can make a decision on taxes this week,” he said. “We just need to do it.”

Budget Challenge

The demand for tax details presents another challenge for House leaders who have spent months delaying the committee markup of the budget over concerns that it wouldn’t get enough Republican support to pass in a floor vote. The latest plan was to adopt the budget resolution with only GOP votes this month, before the House leaves for a five-week break.

Meadows said at this point, so late in the year for the budget process, the main reason to pass a budget is to outline the planned tax overhaul.

Appropriators are already churning out spending bills written to the topline numbers that have received an unofficial approval from the Budget Committee: $621.5 billion on defense and $511 billion on non-defense discretionary spending.

The holdup so far has been over cuts to mandatory spending, such as welfare and food stamps, which conservatives want to fast-track by linking to tax reform. Moderates say tying entitlement reform to the budget instructions that they plan to use for a tax-code rewrite makes it politically more difficult to cut taxes for businesses and the wealthy.

Now conservatives want to see the details of the tax plan upfront, including the new corporate rate and changes to streamline the tax code.

One-Page Plan

So far, most public discussion of a tax plan has centered on variations of a blueprint laid out by House Republicans last year. A one-page plan released by the White House in April had a lower corporate rate and didn’t take a position on the main areas of disagreement.

Ohio Republican Jim Jordan, one of the founders of the Freedom Caucus, made it clear that he thinks a Republican tax plan should not include the border-adjusted tax, which would be a 20 percent levy on companies’ imports and domestic sales. Exports would be exempted. The tax, which would replace the current corporate income tax, is estimated to raise more than $1 trillion over the next decade to offset rate cuts.

“Did the American people elect Republicans to come here and place a new tax on the American economy, called the border adjustment tax, and did they elect us to come here and increase discretionary spending?” Jordan said Wednesday. “I don’t think so.”

Along with the details of the tax plan, Freedom Caucus members said the House shouldn’t recess next month until members vote on a plan raise the debt ceiling so the U.S. government can borrow enough to pay its creditors. Most estimates show the Treasury can continue to use extraordinary measures to meet debt obligations until the fall.

“We know it’s coming,” Scott Perry, a Republican from Pennsylvania, said of the debt ceiling. “There’s no reason why we shouldn’t get to that immediately.”

Ryan of Wisconsin has said he will make sure the U.S. government doesn’t default on its debt, but he has made no commitment to address the debt limit before August.

The only reason the House would be in session next month would be to vote on a health bill if it wins enough GOP support to pass in the Senate, according to two Republican aides with direct knowledge of the plans. Senate Majority Leader Mitch McConnell said Tuesday that the Senate will delay its own August recess by two weeks to continue working on the Obamacare repeal plan and get through more Trump administration nominations.

— With assistance by Erik Wasson

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