The nine-page dax document unveiled by the Trump administration this week included may of the proposals we expected to hear: streamlining the tax code for individuals into three (or possibly four) brackets, eliminating state and local deductions, repealing of the estate tax, major reductions on corporate rates and incentives for American companies to repatriate billions of dollars in overseas profits.
And while the details of the bill have yet to be worked out (Treasury Secretary Steven Mnuchin has said they will be negotiated in committee), after a handful of holdout senators killed the Republican effort to repeal and replace Obamacare (resulting in an embarrassing defeat on repealing an unpopular law that President Donald Trump has said “should’ve been a slam dunk”), the administration is likely already trying to figure out where senators stand. And, more importantly, where various senators stand in terms of their reservations.
To help give readers a sense of where the legislation stands, Bloomberg has identified six senators who may (and in many cases will) cause problems for the Trump administration by opposing the bill. The list includes moderates, hard-core conservatives, and several senators who already have – or may soon announce – that they will not be seeking reelection, presumably allowing them more freedom to consider the legislation on its actual merits.
The full list is presented below:
“The Deficit Hawk” (Bob Corker)
Earlier this week, the Tennessee senator announced that he will not seek a third term in the senate – effectively freeing him from political considerations (presumably unless they would jeopardize his chances of winning a seven-figure lobbying payday after leaving office) and free to vote based on his convictions.
Unfortunately for the Trump administration, those considerations could lead him into conflict. Corker, a well-known “deficit hawk”, has said the bill “cannot produce a deficit”. The official administration line is that any initial deficits will be closed by future revenues produced as a byproduct as economic growth.
Corker recently struck a deal with Toomey paving the way for budget legislation that would allow for huge tax cuts in theory, but Corker has said he wouldn’t allow them to balloon the deficit. “With realistic growth projections, it cannot produce a deficit,” Corker said Wednesday. “There is no way in hell I’m voting for it.” He estimated that some $4 trillion in revenue-raisers must be achieved in order to ease his concerns.
Corker also said he wants to “get down to lower corporate rates and get rid of all these crazy issues that exist in our tax code,” describing his opposition to raising the deficit as a “hard stand” in order to “make sure we stay fiscally sane.”
“The Hard No” (John McCain)
John McCain has twice now led Republicans to believe he would provide a crucial vote in support of their Obamacare repeal-and-replace bills, only to dash everybody’s hopes at the last minute (the first time around, he cast a surprise “no” vote on the Senate floor that elicited audible gasps from his colleagues). McCain, whose distaste for President Donald Trump dates back at least to when then-candidate Trump mocked him for being taken prisoner during the Vietnam War, is already sending subtle hints that he will likely oppose the administration’s agenda, no matter what form the legislation ultimately takes.
His comment that he would like to see the tax bill receive “bipartisan support” echoed his reasoning for opposing Graham-Cassidy. As Bloomberg admits, winning Democratic support “may be difficult.” This suggests that McCain will probably start off in the “no” column.
The irony, of course, is that if a handful of Democrats do break ranks, McCain’s vote would be of little consequence.
“That may be difficult to reconcile with Senate Republican leaders’ plans to use the fast-track procedure on taxes that they tried to use on health care. Will the so-called maverick be satisfied? Initial reaction among Democrats to the tax framework indicates firm opposition, but McCain was more positive, praising the multiple tax hearings that the Finance Committee has held and saying he looks forward to reviewing the proposal.
McCain, 81 and battling brain cancer, has a history of bucking his party on the issue of taxes. He was among the few Senate Republicans to vote against President George W. Bush’s two separate tax cuts in 2001 and 2003, although he later came to support making them permanent.”
“The Ideologue” (Rand Paul)
After Paul opposed the Republicans’ Obamacare repeal-and-replace agenda at every turn, each time claiming that the bill under consideration wouldn’t repeal enough of the law, his early remarks suggest that he and the Trump administration might find more common ground when it comes to cutting taxes.
True to his libertarian ethos, Paul is seeking massive cuts of “at least 15%” for every tax payer. He has also rejected the notion that cuts should be “revenue neutral” – presumably a priority for deficit hawks like Corker. The Trump administration has repeatedly tried to justify expanding the deficit, saying the cuts will bolster growth, which will in turn compensate for some of the shortfall. Paul appears to be on board with this.
The Kentucky libertarian is never an easy vote to win over – he proved it during the health-care debate by staunchly opposing the Senate’s last opportunity to undo Obamacare before the Sept. 30 deadline, complaining that it didn’t go far enough. And now he’s staking out a far-reaching position on taxes, too, calling for a “large cut of at least 15 percent for every taxpayer” in an Aug. 30 op-ed.
Paul is also opposed to paying for a tax cut, describing the push for revenue neutrality as “a terrible idea” that simply shifts around the tax burden and fails to achieve “real tax cuts.” He called on his party to reject the principle of revenue neutrality, warning it will “result in those with the best lobbyists, lawyers and accountants being the winners, while most everyone else either gets nothing or largely loses out.” Senator Ted Cruz of Texas has also said a tax plan should include big cuts, pushing back on the idea of revenue neutral changes.
“The Kentucky libertarian is never an easy vote to win over – he proved it during the health-care debate by staunchly opposing the Senate’s last opportunity to undo Obamacare before the Sept. 30 deadline, complaining that it didn’t go far enough. And now he’s staking out a far-reaching position on taxes, too, calling for a “large cut of at least 15 percent for every taxpayer” in an Aug. 30 op-ed.”
“The Tax Wonk” (Pat Toomey)
Toomey is widely recognized as one of the Republican “thought leaders” on tax policy. Toomey has been “an outspoken cheerleader” for cuts, and, like Paul, believes revenue-neutrality would be counterproductive. However, he has staked out two goals that could bring him in conflict with either the administration, or possibly more moderate Republicans. One is capital expensing (allowing businesses to write off the cost of capital projects). The other is the repatriation of corporate profits.
The second-term Pennsylvania senator is an outspoken cheerleader for tax cuts and has argued against the need to pay for such a plan, saying the overarching focus must be on economic growth and that a revenue-neutral plan would be “anemic.” He successfully pushed for an agreement on a budget vehicle that allows the tax cuts to add to the deficit. He’s also argued for changing the rules to extend the budget window for a temporary tax cut from 10 years to as many as 30 years. “I’d like to stretch that out as much as possible,” he said.
Toomey, along with fellow tax wonk Senator Rob Portman of Ohio, are seen as the Senate Finance Committee’s thought leaders on tax policy. One of Toomey’s big priorities: “Expensing capital might be the most pro-growth element of this exercise,” he told reporters Wednesday. “That’s really really important to me.” Another is to create an incentive to bring home the estimated $2.6 trillion in corporate profits sitting overseas and set up a territorial system where U.S. companies aren’t subject to “an extra layer of tax from overseas income.”
“The Chairman” (Orrin Hatch)
Hatch is one of the few remaining senators who was around during the Reagan-era tax-code overhaul. So far, he’s been tight-lipped about the administration’s initial nine-page proposal.
However, Hatch’s support is vital to moving the bill out of committee (a committee that he controls). Hatch, who, as the oldest senator, has said he may not run again, may also be free from political considerations.
“Hatch, who was a second-term senator during the last big tax-code rewrite in 1986, is keenly aware of the issue’s complexity. He declined to say if he believes the Senate will secure a majority to eliminate the state and local tax deduction, a major revenue-raiser targeted in the Trump-GOP framework. “I’m not going to talk about specifics,” he said. “It’s a very complex bill to begin with. And we’re going to have to make some very tough decisions about what we keep and what we don’t.”
Hatch’s panel has a 14-12 split between Republicans and Democrats, which means he can afford to lose no more than one Republican if Democrats decline to play ball. He said he hopes to win Democratic support, but conceded that it “would be unique” in this political environment. “If they want to play politics with it, it’s another matter.”
“The Moderate” (Susan Collins)
Finally, we get to Susan Collins. Collins, who opposed repeal-and-replace, is known for her “heterodox” voting record. She has already voted against measures for repealing the estate tax (one of the objectives outlined in the Trump administration’s nine-page document), and she’s also voted for measures raising the top tax rate for people earning more than $1 million (suggesting that she might insist on a fourth, higher tax bracket, a possibility that Trump and his representatives have said they would be open to.
The Maine senator has voted for numerous tax cuts in the past, including the Bush tax cuts of 2001 and 2003. But she has also taken some heterodox positions that could be a factor: In 2015, she was the only GOP senator of 55 who broke ranks and voted against a budget measure calling for repeal of the estate tax, which the Trump-GOP framework seeks to do. In 2008, she voted for a measure to raise the top tax rate for people earning more than $1 million.
For now, Collins isn’t revealing any of her thoughts on the framework.
“I’m going to take the weekend to study it,” she said.
Of course, the final bill hasn’t taken shape yet. But the broad strokes suggest that the administration will be fighting to balance two sets of competing interests: On one side will be Republicans who want to see responsible deficits and more progressive taxes on the wealthy, and the other will be more conservative senators who are less concerned about deficits, and are more focused on across-the-board cuts.
The administration’s tiny margin of error (Republicans can’t afford to lose more than two votes, assuming every Democrat opposes the bill) gives holdouts considerable leverage; it could also be an opportunity for Trump to show off his much hyped “deal-making” prowess (not to mention the political attack machine that is Breitbart) to coax reluctant senators into voting for the final package. One thing is clear: wither neither Obamacare repeal, nor tax reform heading into the midterms, 2018 would be a difficult year for the republicans.