Tentative U.S. Budget-Tax Deal Gets Nod From Two Republicans

  • Budget committee weighing tax cuts amounting to $1.5 trillion
  • Path forward would depart from McConnell’s previous statements

Sen. Portman Sees Fundamentals for Tax Reform

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Senators Bob Corker and Pat Toomey, two Republican members of the Senate Budget Committee, said they have agreed to a tentative deal to craft a budget that would allow “headroom” for a significant tax cut, though they didn’t specify the size of the reduction.

Corker and Toomey had disagreed over allowing a budget that would add to the deficit. On Tuesday, they hammered out a potential path forward with Senate Majority Leader Mitch McConnell: a budget resolution that will allow for a tax cut, according to a joint statement from Toomey and Corker.

Corker, a self-described deficit hawk, said he’ll still insist that any tax bill pay for its cuts through economic growth, as determined by valid economic modeling. While he was silent on the size of the cuts, another Republican member of the budget panel, Senator Ron Johnson, said the group is considering a budget allowing for tax reductions amounting to $1.5 trillion.

If the panel accepts a budget plan that would add to the long-term deficit, at least some of the cuts in any tax-overhaul bill that follows the budget may have to be only temporary. That’s because Senate leaders want to use a procedure that would protect the tax legislation from a Democratic filibuster -- and that procedure requires that the legislation can’t add to the long-term deficit.

The agreement represents a pronounced departure from McConnell’s position earlier this year. McConnell said during a Bloomberg interview in May that a tax overhaul would need to be revenue-neutral -- balancing cuts with provisions that broaden the tax base -- and can’t add to the nation’s “alarming” debt.

"While each member of the caucus will have to make their own decision, I believe our agreement gives the tax writing committees enough headroom to achieve real tax reform that eliminates loopholes and lowers tax rates for hardworking Americans," Corker, of Tennessee, said in a joint statement with Toomey released Tuesday evening.
Toomey, of Pennsylvania, said in the statement that the plan they’ve agreed to will give the committee the leeway "to write a pro-growth tax plan that reforms the code, causes
the economy to surge, and ultimately results in reduced federal budget deficits."

Corker had said earlier Tuesday that he wouldn’t specify a number for the tax cuts until he had spoken to more committee members.

‘Getting Close’

Senator John Thune, the chamber’s No. 3 Republican, said word of Tuesday’s agreement signaled progress on a budget resolution.

“Corker and Toomey probably represent the far ends of the spectrum when it comes to what they want to see that look like,” Thune, of South Dakota, said. “The fact they are coming together leads me to believe we are getting close to a budget that will come out of committee and we can bring to the floor.”

Johnson of Wisconsin said $1.5 trillion is the minimum amount he’d like to see, and he’d consider doing as much as $3 trillion. That would make it easier for the GOP to create a tax bill with cuts that aren’t completely offset by revenue raisers or the elimination of deductions. Johnson said the panel’s numbers don’t take into account the economic growth that would result from tax changes -- and he believes the cuts would stimulate enough growth to pay for themselves.

Johnson and others advocate the use of “dynamic scoring” -- a method that considers the effects that any tax changes would have on the larger economy -- as opposed to “static scoring,” which examines only the changes themselves. Economists disagree on the best way to shape dynamic scoring models.

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“There’s a spectrum of opinion inside our conference,” Johnson told reporters Tuesday. “Why do tax reform if you are not getting a lot of economic growth?”

A Senate Republican aide said that the budget is expected “sooner rather than later,” and discussions are ongoing among the committee and the wider conference.

Johnson said that part of the $1.5 trillion in static revenue cuts, as compared to the Congressional Budget Office baseline, would be due to the committee assuming that $450 billion in expiring tax breaks are extended. CBO’s baseline assumes the tax breaks actually do expire, even though Congress regularly extends them. Johnson said assuming the tax breaks are extended better represents “reality.”

The arguments being made to allow for $1.5 trillion of tax cuts -- dynamic scoring and current policy adjustments -- are “disingenuous” and can “at best” only account for a small fraction of the cut, according to Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

‘Remarkably Irresponsible’

“The President and members of Congress have spent years warning of our large and growing national debt and have said their goal was to pursue tax reform that doesn’t make that debt worse,” MacGuineas said in a statement. “With our debt at record levels and set to rise for the foreseeable future, adding another $1.5 trillion tax cut to the debt would be remarkably irresponsible.”

Republicans have to agree on a 2018 budget resolution -- a necessary step to unlock the procedural maneuver they intend to use to pass the tax plan with 50 votes in the Senate. The party controls only 52 of the chamber’s 100 votes. White House advisers and congressional leaders have promised a tax framework outlining more details the week of Sept. 25, which may help to assuage members of the conservative House Freedom Caucus, who have said they won’t vote to pass a budget out of the House until they get more details on tax changes.

Senator Mike Crapo of Idaho, a member of the tax-writing Finance Committee, said Monday he wants a tax cut that’s “as big as we can get” within the budget window, though he declined to put a number on it. He said it “depends on what kind of dynamic impact a tax relief package can have, but I want it to be as big and bold as we can get.”

Another committee member, Senator Bernie Sanders, a Vermont independent who caucuses with the Democrats, said senators should discuss who’d get the benefits of a tax cut before discussing its size.

“My strong guess is that Republicans want to give a tax cut to billionaires which is exactly what we don’t need,” Sanders said in an interview.

— With assistance by Sahil Kapur

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