This week MMG was tracking developments with tax reform, including efforts toward bipartisanship, sticking points like the state and local tax deduction, and House Speaker Ryan’s threat to cancel Christmas (for lawmakers).
Bipartisan Tax Reform?
Senate Majority Leader Mitch McConnell is trying to garner support from at least one Democrat, Sen. Joe Manchin of West Virginia, The Hill reports. Manchin, whose state went heavily for Donald Trump in last fall’s presidential election, is one of three Senate Democrats who did not sign an August letter to President Trump demanding that tax reform be revenue neutral, and that it not be passed through the reconciliation process. Sens. Manchin, Joe Donnelly of Indiana and Heidi Heitkamp of North Dakota are all from heavily red states that voted for Trump by significant margins, and they’re up for reelection in 2018. If Senate Republicans can get their support, the chance decreases significantly of a more extreme package influenced by the likes of Republican Sen. Rand Paul.
SALT in the Wound
Republicans are engaging in talks on one of the hottest issues in the tax reform debate, the state and local tax deduction, The Wall Street Journal reports. The deduction is sure to be one of the most difficult provisions for Republicans from high-tax states to swallow; they’re sure to feel heavy pressure from high net worth constituents. Maintaining the state and local tax deduction would significantly hurt the projected revenue of any tax bill. Republicans are currently discussing the possibility of an income cap on the deduction.
‘Twas the Night Before Christmas, but Not for the House
House Speaker Paul Ryan said that the House will stay in session through the Christmas holiday if movement isn’t made on tax reform, Axios reports. This shows that the House GOP leadership understands the significance of their tax reform promise. If lawmakers aren’t able to deliver by the 2018 midterm elections, the Republican-led administration and Congress will have had no major legislative achievements, increasing the likelihood of a backlash in the midterm elections.
Ben Marsico works on public policy issues for ACG.