Taxes

Tax Cuts Live or Die on These Seven Questions

How soon can Republicans drop their larger ambitions? And six more.

Snatching defeat from the jaws of victory isn't easy.

Photographer: Andrew Harrer/Bloomberg

Progress on the Republican tax bill is slow going. Slow enough that at least some seasoned observers think it's close to dead, given how far they are behind the trajectory of, say, the 2001 tax cut bill. And almost everyone agrees that tax reform is incredibly difficult, and basically just can't happen on a straight partisan vote. 

And yet the logic of why they really should pass something is very strong. Republicans love tax cuts! Which drives Bloomberg's Joe Weisenthal to ask more or less the same question I asked last week:

So what is going to determine whether Republicans really manage to pass something significant during the current Congress?

How soon can they drop their larger ambitions?

Remember: Tax cuts easy, tax reform hard. Closing loopholes equals losing votes, and without any Democrats (and assuming Republicans can pass a budget resolution which would allow them to use reconciliation procedures) Republicans can only afford to lose, as of today, 23 votes in the House and 2 in the Senate. Similarly, while it might be nice to achieve permanent changes, the only realistic ambition available to them are tax cuts that sunset in 10 years. The longer they hold out hope for something more ambitious, the less time they'll have once they face reality. 

How unpopular will their bill be?

Democrats will hit hard over a bill in which the bulk of tax cuts go to the rich -- which will be the case in almost any plausible Republican tax bill. Having an unpopular president in the White House can't help. The bill polls badly now and is likely to stay that way. My guess is that won't stop too many Republicans from voting for something which almost all of them will sincerely support and which will be overwhelmingly popular among their supporters. But the more unpopular the bill gets, the more they'll shy away from voting on it close to the election, and therefore the closer the deadline to get it done. 

Do any Republicans really care about the deficit?

I'm fairly confident that most do not. Rhetoric aside, they've never really acted as if they do. They consistently support lower taxes, lower spending for many domestic government programs, and higher spending on defense and some other programs, and have rarely supported giving any of their other preferences up in order to lower federal budget deficits. Mostly, they rely on fantasies -- that tax cuts will pay for themselves, or that tax cuts will produce lower spending in the future -- to pay lip service to the whole idea. But some of them may really prefer lower deficits to lower taxes, in which case they would presumably vote against any large tax cut bill. 

How disruptive is Trump (Part 1)? 

House Republicans voted for a health care bill Trump strongly supported, so much so that he held a White House ceremony when it passed, only to later bash the bill as "mean." Every single Republican in Congress is very aware of that, and knows it could happen again. In fact, just this week a report said Trump had turned against the provision in the tax bill framework eliminating state and local tax deductions despite having previously signed off on it. Now, a simple tax cut wouldn't include that anyway, so it was pretty much dead before Trump said anything. But the key point is that Republicans will vote for this bill knowing that they will make themselves vulnerable not only to attacks from Democrats, but also from the Republican president insisting they vote for it. That will tend to make them more likely to just give up if they run into trouble, rather than pushing as hard as they can for a deal.

How disruptive is Trump (Part 2)?

I doubt if Trump's various feuds with Bob Corker, John McCain, Mitch McConnell and other Republican senators will cost him any votes when it comes right down to it. Members of Congress usually vote based on all sorts of reasons, but personal animus against the president isn't normally one of them. Normally. This isn't a normal president, and there's no guarantee that none of them won't seek their revenge.

Just how dysfunctional are House Republicans?

Even if all of them want a tax bill to pass, there's still the House Freedom Caucus to contend with -- a group which disdains compromise and is almost entirely dedicated to letting the perfect be the enemy of the (from their perspective at least) good. Will they insist on adding controversial provisions to a bill otherwise acceptable to the entire Republican conference in both chambers? Or will any other group within the House attempt a similar ploy? And Speaker Paul Ryan and the rest of the House Republican leadership have failed to demonstrate the skills to work out the problems caused by factions within the party, including between the two chambers. 

How badly do they want it?

That's really the most important question. They almost certainly want this to happen more than they wanted health care to pass, for a variety of reasons. Despite all the dysfunction among Republicans at both ends of Pennsylvania Avenue, there's really no strong reason that they couldn't do a simple, deficit-increasing, ten-year tax cut. If enough of them, and enough of their constituents and other supporters, want to do it badly enough. And it's very hard to know whether that's the case or not.

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

    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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