Trump’s Tax Plan Cleared a Hurdle, but Three Big Ones Remain

Last week, the Republican push to revitalize and overhaul the existing tax code took a big leap forward when the House passed a budget resolution.

The recent resolution matched the Senate Budget Committee’s own version; these recent budget victories are a major hurdle for the intended tax overhaul. A final budget deal between the two will allow Republicans to approve a new tax package, even if Democrats object. This would be a huge win for Republicans, particularly in light of 2018’s looming midterm elections.

The passage of the House budget measure was not a sure thing. Many in the House Freedom Caucus objected, or held out for a better deal. Some lawmakers also had concerns about the tax plan itself. Last Thursday, though, the group came together and approved the measure with a 219 to 206 vote.

This vote is the first step towards the desired overall tax plan, designed to overhaul and simplify the tax code and to benefit a wide range of citizens and businesses instead of special interest groups. However, three major challenges remain as Republicans and President Trump seek to move forward with reform.

#1: Time

The calendar is actually against Republicans as they work to pull together a deal that everyone can agree on. It took almost a year to come up with the framework that was agreed to last week. President Trump has asked for movement by the end of the year, but timing may make it difficult for everyone to agree on tax policy and to create something that can become an actual mandate or bill.

Adding to the time burden, the budget is not complete. Senate Republicans are frantically working to approve their own resolution, targeting the end of October as an ideal time to begin talks with the House. Even with an early November agreement, only weeks would remain to introduce the actual bill or bills, settle any difference and actually pass them.

The busy holiday season is looming, further cutting down on the actual number of work days left in the year; some Republicans also see the potential victory of Roy Moore (Alabama) on the 12th of December as a watermark date.

Moore, who defeated incumbent (and presidential favorite) Luther Strange in the primary, would be a strong opponent to Senate Majority Leader Mitch McConnell and his existing tax agenda.

#2: Details

Part of the concern over time is that the package itself is still not fully defined. While there are already over $5 trillion in tax breaks proposed by Republicans, only about a third of that figure is actually achievable under the current budget agreement.

With an estimated $1.5 trillion available, the plan as it is would result in a deficit, something many conservatives disagree with and would have a hard time agreeing to. The plan is also incomplete, so full details are simply not available yet and the tax reform plan can’t become law until the details are actually spelled out.

Some Republican leaders from highly taxed states like New York, Texas and New Jersey already oppose some components of the plan which seek to repeal state and local tax deductions. Others protest potential deficit increases that could be a result of the plan as it is presented.

Squabbling over the details could delay the legislative process enough to push a vote into the next calendar year.

#3: Politics

The tax deal faces its largest hurdle yet in the form of simple politics. From in-fighting within the Republican party itself to a perceived disconnect between leadership and the people they serve and even the objections of Democrats, passing the new tax code will be an uphill battle.

Republicans fearing a backlash in the 2018 elections and suffering from a loss of resources from donors are frantically working to get the budget passed, but each has an agenda.

While the recent budget vote in the House shows that Republicans can unify and rally to move forward, the clock is ticking. The challenge of time, agreeing on details and even working with colleagues who are afraid to commit because of pending elections mean could preserve tax cutting as a conservative fantasy for years to come.
Regards,

Ethan Warrick
Editor
Wealth Authority