Passage of tax reform could slip to next year, President Trump suggested October 16, just as Senate lawmakers prepare to take a key vote on a fiscal 2018 budget resolution to allow fast-track consideration of a tax overhaul.
Trump alluded to former President Ronald Reagan’s long journey to pass tax reform, noting that he has been in office for only about nine months. “I would like very much to see it be done this year. . . . If we get it done, that’s a great achievement. But don’t forget, it took years for the Reagan administration to get taxes done,” Trump said during an impromptu press conference at the White House with Senate Majority Leader Mitch McConnell, R-Ky.
McConnell took a similar tack, pointing to former President Obama’s difficulty in reaching his legislative accomplishments. “The goal is to get it done this calendar year. But it is important to remember that Obama signed Obamacare in March of year 2. Obama signed Dodd-Frank in July of year 2.”
Both stressed that the goal was still to pass a tax bill by the end of the year.
In remarks earlier in the day, House Speaker Paul D. Ryan, R-Wis., repeated his prediction that the House can pass tax reform legislation in November that would become law in December.
“The House passed its budget, Senate’s doing theirs this week,” Ryan said on radio station WTMJ’s Scaffidi and Bilstad. “We’ve got to reconcile the differences. When that reconciled budget is passed, that gives us what we call the revenue lines to write our tax bill to.”
Senate lawmakers expect to pass their budget resolution the week of October 16, but a conference with the House will have to wait until the lower chamber returns from recess the following week. Both resolutions include reconciliation instructions to produce tax reform legislation.
Ryan said once the budget is complete, the House Ways and Means Committee will release the tax reform bill. “We’ll mark it up and pass it, so by early November we’ll get it out of the House. We’ll send it to the Senate,” he predicted. “The goal: get law in December so that we wake up with . . . a new tax code in 2018.”
The final GOP budget for fiscal 2018 will determine whether tax reform includes a fourth income tax bracket that ensures wealthy Americans don’t receive a tax cut, Ryan said October 15, adding that middle-income taxpayers, not high-earning individuals, should get a rate cut from tax reform.
“That is something that we’re doing and looking at. The question is just how to set the numbers,” Ryan said on MSNBC’s Kasie DC. “We’re waiting to see what the budget resolution looks like to see how those numbers work.”
The Republican tax reform framework provides the taxwriting committees the discretion to create a fourth, top tax bracket above 35 percent to apply to wealthy individuals.
Senate passage of the budget resolution could be more difficult because of the absence of Senate Appropriations Committee Chair Thad Cochran, R-Miss., who is expected to remain at home the week of October 16 with health problems. Meanwhile, Sen. Susan Collins, R-Maine, once considered a holdout, said she would vote for the budget resolution.
Differences in the budget plans are not the only sticking points facing tax reform, however. Treasury Secretary Steven Mnuchin predicted tax reform negotiations would not be derailed by lawmakers who oppose eliminating the deduction for state and local taxes.
Speaking on Fox News’ Sunday Morning Futures, Mnuchin said talks continue with those lawmakers toward a solution on repealing the deduction. The federal government should not be subsidizing the economies of high-tax states, he said.
Mnuchin repeated his prediction that Republican tax reform would not increase the federal budget deficit because the revenue loss from lower tax rates would be made up through economic growth and the use of a current policy baseline.
Budget Conference Report
Republicans on the Senate Budget Committee made similar points in their conference report on the fiscal 2018 budget.
According to the conference report, efficiently cutting tax rates will produce the same revenue level if tax expenditures are eliminated and the economy grows.
“If tax reform can stop the projected economic decline, income and profits will rise, along with federal revenues to the Treasury,” the report says. “A return to historic average growth would decrease projected deficits by over $2 trillion in the 10-year window, more than sufficient to pay for the decrease in revenues assumed under static scoring conventions that do not fully account for economic growth.”
The Senate budget also assumes more than $1.6 trillion in tax cuts, of which $1.5 trillion can be processed through fast-track reconciliation procedures, the report says, noting that GOP lawmakers predict that average economic growth of 2.6 percent over the next decade would result in an on-budget surplus. “These dynamic effects, along with the elimination of excessive tax loopholes, will help offset the projected static cost of tax reform assumed in the reconciliation instruction,” the report says.
Dylan F. Moroses and Asha Glover contributed to this article.
Follow Stephen K. Cooper (@ScoopOnTaxes) on Twitter for real-time updates.