Republicans are keeping their legislative options open for passing tax reform, indicating they will still look to use the budget reconciliation process despite a letter from Senate Democrats August 1 outlining conditions for a bipartisan tax reform proposal.
“We will need to use reconciliation, because we have been informed by a majority of Democrats in a letter I just received today that most of the principles that would get the country growing again they’re not interested in addressing,” Senate Majority Leader Mitch McConnell, R-Ky., told reporters during a weekly briefing.
Republicans will start work on tax reform after Labor Day, beginning in the House, and will include markups in both the House Ways and Means Committee and the Senate Finance Committee, McConnell said. He added that the effort would likely not follow historical precedence. “I don’t think this is going to be 1986, when you had a bipartisan effort to scrub the code.”
Others in the leadership have suggested that committee markups on tax reform in the Senate could produce bipartisan discussions. “We’re going to have a markup in Finance, we’re going to have those, and it will proceed in a more traditional way,” Finance Committee member John Thune, R-S.D., told reporters, noting that Democrats have asked for a bipartisan process on tax reform.
Hatch told reporters he would prefer a bipartisan process and tax reform proposal, but suggested Republicans may still use reconciliation because Democratic obstruction is impeding their ability to work together.
Dems Lay Out Tax Reform Buy-In
The letter in question was signed by 45 of the Senate’s 48 Senate Democrats and went to President Trump, McConnell and Finance Committee Chair Orrin G. Hatch, R-Utah. It presents three principles for tax reform, including ensuring middle-income families do not see a tax increase while high-income earners get tax relief, and using a regular order process to debate legislation rather than using the budget reconciliation process. Democrats also would “not support any effort to pass deficit-financed tax cuts,” which they wrote may harm safety net programs like Social Security and Medicare.
Democrats said they were willing to compromise on some level, but that using reconciliation puts Republicans at the same risk they faced trying to pass healthcare reform.
“It’s very concerning to hear Senator McConnell talk now about immediately going to reconciliation. It’s the same thing they did on healthcare,” Finance Committee member Debbie Stabenow, D-Mich., told reporters during a weekly press briefing. “The day after we were sworn in they decided to immediately go to reconciliation, it was going to be done only with Republicans, and they said we didn’t want to work together.
“It makes no sense to start immediately saying they’re going to shut us out and not try to get a bipartisan bill that will work for the country,” she added.
Senate Minority Leader Charles E. Schumer, D-N.Y., said that not working with Democrats on tax reform could lead Republicans to “a very similar result” as healthcare.
“Why go through six months, again, on tax reform, which they went through on healthcare, and then come together? We’re invited in, we want to participate,” Schumer said.
Some Democrats suggested Republicans need to change the focus of their tax reform proposals. Finance Committee ranking minority member Ron Wyden, D-Ore., told reporters “the consumer drives 70 percent of the American economy today, and that’s middle-class votes buying cars and paying for education, child care, and buying houses. So that’s where you get the real economic growth.”
He said he hopes Republicans will abandon the reconciliation approach and engage Democrats through the committee process and regular order, recalling the bipartisan work that led to the Tax Reform Act of 1986.
Wyden said Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn visited the Finance Committee recently, but characterized the meeting as “more a dog and pony show than it was any discussion of real specifics.”
Three Senate Democrats, including Heidi Heitkamp of North Dakota, did not sign the letter. Heitkamp told reporters her decision was more about perception than about supporting policy. “It wasn’t about not liking it. I think that it’s critically important we be open-minded and talk to everybody about all the points of view.”
McConnell noted those Senate Democrats who did not sign the letter, suggesting “there may be a few who may be open to pro-growth tax reform. Even though you do the reconciliation process, nothing prevents any Democrat from supporting it who chooses to.”
Finance Committee member Robert P. Casey Jr., D-Pa., told Tax Analysts that beyond the letter, he would be particularly interested in advancing cost recovery reform, highlighting the manufacturing hubs in his state. “I’m going to be looking for ways to make sure that Pennsylvania benefits — our workers and our economy. What someone might propose that they pay for may not work in our state. Accelerated depreciation is one of those [areas]. We want to make sure manufacturers in our state can compete.”
Casey said he would follow the issue closely, but does not yet have a position on current proposals like the trade-off included in the House Republicans’ blueprint between a full business expensing provision and the elimination of interest deductibility, or Wyden’s cost recovery reform discussion draft from last year.
Asha Glover contributed to this article.
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