Taxes

Seven Reasons Tax Cuts Won't Be Easy for Republicans

What we've learned from the health care debacle may hint at the fate of taxes.

No reform, just cuts.

Photographer: iStockphoto via Getty Images

Serious tax reform has never seemed particularly likely, but Republicans are very good at passing major tax cuts. On the other hand, the party has campaigned on getting rid of Obamacare for years, so does the (probable) failure 1 at that mean that a big tax cut is doomed? Here's what we've learned from the health care debacle that may hint at the fate of taxes.

1. Donald Trump really, really doesn't care about policy.

He's ignorant not only of the details (something many politicians share), but of the broad outlines. His discussion of the current Republican health care bill Sunday on Face the Nation revealed how little he's bothered learning what's in the bill. He basically has a few catch phrases he learned during the campaign, and he uses them more or less randomly, whether they apply or not, and he collapses if pressed beyond that. Could he care more about taxes, especially given his personal stake in the outcome? Perhaps, but I wouldn't count on it.

2. Trump isn't getting much help.

Neither the White House nor the larger administration appear to have been seriously involved in any aspect of the substantive negotiations over health care. Combined with the first point above, it basically means anything that does happen on taxes is likely to be entirely up to Congress. The one-page tax "plan" the White House introduced last week? There's no reason to expect Congress to pay any attention.

3. Watch the House of Representatives, not the White House.

Involved or not, the White House has constantly pushed for action, and claimed such action was imminent. I think we all realize by now that when the president or his people say something will happen that they are safely ignored. I expect the same will be increasingly true for Republicans in Congress with respect to White House demands for action.

4. Congressional districts still matter.

Health care reform proved difficult in part because the facts back in their districts pushed Republican members of Congress to hesitate, as Greg Sargent and Byron York both explained on Friday. This suggests that when push comes to shove, at least a fair number of Republican politicians are less ideological and less partisan, and more interested in preserving their own careers, than some have believed. Of course, most of the time voting a straight party line in the House and Senate is (or at least is perceived to be) the safest move for politicians, but apparently districts still really matter. That's very bad news if, for example, Republicans are depending on being able to end deductions for state and local taxes.

5. Congressional Republicans aren't really good at policy.

They don't sound as clueless as the man in the Oval Office, but numerous House Republicans either demonstrated or (off the record) admitted to not really understanding the bill they were voting on. That's not unusual for rank-and-file members who were not on the relevant committees, nor is it necessarily bad -- the House has always had a strong division of labor, in which members trust the expertise of various party, committee, or factional leaders. Unfortunately, those leaders themselves may not have had a strong enough grasp of policy detail to make cutting deals easy.

6. Side deals aren't happening in the House. 

Add the items 4 and 5 together and we can conclude: Leaders were unable (or at least so far have been unable) to design district-specific inducements for enough on-the-fence members of the House to reach a majority, even though many Republicans might have been open to it. It's even possible that rank-and-file members of the House don't know policy well enough to know what to ask for. Could that be a problem for taxes? Yes, it could. 

7. Caring about the issue at hand matters.

At the end of the day, very few Republican politicians entered their professions because they wanted to fix health care. Tax cutting, I suspect, is higher on their personal agendas. Enough to make a difference? Maybe!

Put it all together, and while these clues can't tell us whether a tax cut will pass or not, they can hint at what -- and where -- to look at. Don't waste your time looking for signals from the White House or Treasury; the action will be in the House and the Senate. Watch particularly for whether congressional Republicans, from committee chairs down to back-benchers, seem to know what they're talking about when they talk taxes beyond the stale talking points. Expect district and state interests to make a bigger difference than the rhetoric suggests. And, believe it or not, the enthusiasm these Republican politicians have or don't have for getting the job done probably matters more than some cynical analysts might think.

One more point. The drive against Obamacare is mostly fueled by the campaign promises of Republican politicians and by talk-show hosts and other Republican-aligned media; in both cases, that probably means it's ultimately fueled by what excites rank-and-file Republicans. The drive for tax cuts is primarily driven by Republican-aligned interest groups and conservative ideology. So to some extent (and there are other factors to consider as well), the fate of the two bills might be a test of where influence really lies within the Republican Party. If you have a good guess about that -- and I don't -- you might have the inside scoop on whether a major tax cut is on its way or not.  

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

  1. It's still possible that congressional Republicans will "repeal and replace" Obamacare, or at least doing something vaguely like that, but it's not at all likely. They're now saying that they have the votes in the House and will vote on Wednesday, but as Bloomberg's Steven Dennis reminds us, the thing to do when you have the votes is to vote, not to claim to have the votes. Regardless -- getting an initial bill through the House is the easy part of passing health care reform for the Republicans, so even if they get that it's still an uphill battle. 

To contact the author of this story:
Jonathan Bernstein at jbernstein62@bloomberg.net

To contact the editor responsible for this story:
Mike Nizza at mnizza3@bloomberg.net

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