Budget Reconciliation, Round Two

After failing to repeal Obamacare using budget reconciliation procedures, GOP congressional leaders will try again, this time with major tax legislation, which President Trump calls a “middle-class miracle,” but critics berate as a tax giveaway to corporations and wealthy Americans.

After failing to repeal Obamacare using budget reconciliation procedures, GOP congressional leaders will try again, this time with major tax legislation, which President Trump calls a “middle-class miracle,” but critics berate as a tax giveaway to corporations and wealthy Americans.

The GOP-controlled Congress is gearing up for another budget reconciliation battle, this time over taxes. The parliamentary scenario is eerily similar to the failed effort to repeal and replace Obamacare.

Like the flawed plans to scrap the Affordable Care Act, Republican congressional leaders are snubbing bipartisan efforts to write a tax plan. Oregon Senator Ron Wyden, the ranking Democrat on the Senate Finance Committee, has worked on bipartisan tax legislation before, but he says he wasn’t consulted on the latest proposal, which President Trump calls a “middle-class miracle,” but critics say gives large tax cuts to corporations and wealthy Americans.

That major tax legislation is attached to budget reconciliation is itself an issue, reflecting GOP unease over the impact of large tax cuts on the federal deficit. Republicans want to make a critical one-word change in budget procedures – from “current law” to “current policy” – that would have the effect of substantially reducing the apparent loss of federal revenue from tax cuts, perhaps by as much as $500 billion. Rep. Richard Neal, the ranking Democrat on the House Ways and Means Committee, criticized the new set of numbers as a “sleight of hand to fool the public.”

Making the deficit impact shrinks is intended to mollify House budget hawks who want to trim federal spending – and who typically refuse to vote to raise the federal debt ceiling, an action that also is pending, but rarely discussed. The budget package approved by a 219-206 vote in the House calls for a $5.8 trillion in spending reductions over the next decade for Medicaid, Medicare, education and national infrastructure.

Trying to pass a tax cut under budget reconciliation procedures is largely a gambit to skirt by the 60-vote cloture rule in the Senate. Under reconciliation, Senate Republicans would only need 50 “yes” votes, plus an “aye” vote by Vice President Pence, to pass the tax cuts. There are only 52 GOP senators, so the margin, as shown by the Obamacare repeal, is tight.

Unlike the effort to repeal Obamacare, Senate Democrats aren’t all in lockstep in opposition to the GOP plan. Three Democrats who face re-election in 2018 have kept their powder dry on tax legislation. Their votes may not be needed to pass the tax cuts, but Republicans are courting them to give their tax legislation the patina of bipartisanship. Trump flew to Indiana to put pressure on Senator Joe Donnelly, promising that “we will campaign against him like you wouldn’t believe” if he didn’t vote for the tax plan.

The battle lines over Obamacare translated more easily into mobilization and messaging – millions of Americans would lose health insurance. Taxation is more abstract. It is harder to get worked up over rich people getting tax breaks than people losing access to health care. Senate Democratic Minority Leader Chuck Schumer’s opening salvo – calling the GOP tax plan “wealth-fare” – hasn’t caught on.

Another dimension of the looming tax debate is its many parts. For example, the child care credit that Republicans have indicated will be included, is popular among Democrats. The potential removal of a deduction for state and local taxes will hit some states, including Oregon that relies heavily on personal income taxation, harder than others. The Portland Tribune reported Oregonians deducted $5.9 billion in state and local taxes from their federal income tax returns in 2015. About half of that amount came on tax filers with income between $100,000 and $500,000 and twenty-nine percent of Oregonians could see higher state taxes as a result, state officials say.

Oregon Democratic Senator Jeff Merkley is taking a point position in opposing the GOP tax plan, describing it as a “massive giveaway to the rich.” And Vox reports that campaigns, such as “Not One Penny” and the Trump tax chicken, are heating up.  TrumpTaxScam.org is posting a calculator to help people determine how the tax changes will affect them.