Trump’s tax cuts are finally on their way

Rick Newman
Columnist

Republicans in Washington are finally poised to get something done.

After a fitful year characterized by party infighting and three failed efforts to repeal the Affordable Care Act, the Republicans who control Congress and the White House seem to be headed toward an important achievement: cutting taxes.

The Senate on Oct. 19 passed a budget resolution that establishes the pathway for a tax-cut bill in coming weeks. Normally, when House and Senate leaders establish a legislative priority, each chamber passes its own version of a bill, with negotiators ironing out the differences in conference-committee talks that can take weeks. But GOP leaders in the House and Senate are hoping to speed the drafting of a tax bill by bypassing the conference committee. That means the House would have to pass the same resolution the Senate just passed.

To make that work, the Senate added provisions to its bill that were key priorities of House members, such as new spending on defense. Members of the House could still make demands that scuttle the speedy procedure, but that is far less likely than it was on the ACA fiasco, when several Republican senators refused to support the repeal effort. Republicans are much more likely to line up on tax cuts, which are now a must-do item for Republicans who need to show they’re competent at something. The House could vote on the Senate bill as early as next week.

“We’ve been predicting enactment of a bill by spring,” analyst Greg Valliere of Horizon Investment wrote in a recent note to clients. “Now we think late winter is possible. These folks are serious — they want a victory, and they want it fast.”

If the House approves the Senate budget resolution, tax-cut legislation could materialize in a matter of weeks. President Donald Trump would like to see the whole thing passed and delivered to him by the end of 2017. But the timing doesn’t really matter, as long as Republicans make steady progress and deliver a bill within the first few months of 2018. If they do that, the bill would probably make tax cuts retroactive to Jan. 1, 2018.

Tough road ahead

The process still won’t be easy. Democrats will oppose tax cuts for the wealthy and for corporations, unless there are giant cuts for middle- and lower-income workers as well, which there probably won’t be. So, the bill will probably have to have unified Republican support. Tax cuts will probably add as much as $1.5 trillion to the national debt over 10 years, which few legislators except GOP Sen. Rand Paul of Kentucky seem to care about. Still, conservative opposition to a budget-busting bill could materialize.

Once the procedural hurdles are cleared, the battle over winners and losers of the eventual bill will rapidly intensify. The winners will almost certainly include business and shareholders that are likely to benefit from a cut in corporate tax rates. Trump and some of his allies want to repeal the deduction for state and local income taxes, which nearly 30% of individual filers claim. Several governors, including some Republican ones, are fighting hard to keep that deduction. If Congress keeps all the current tax breaks, there will be no new sources of federal revenue, which will limit which taxes they can cut. But for Republicans, the size of the cuts may matter less than simply having something to crow about, for once.

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Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman