“My support will be contingent on a final package that generates significant economic growth and does not worsen, but hopefully improves our fiscal situation,” Mr. Corker said of the tax plan.
An agreement on the size of the tax cuts between Mr. Corker and Senator Patrick J. Toomey, a Pennsylvania Republican who has pushed for deeper tax cuts, helped seal the deal.
Passing a budget resolution is a crucial step for unlocking an arcane procedural tool that would allow Republicans to push a tax overhaul through the Senate with a simple majority and without the support of Democrats. Republicans have said they want a bill passed by the end of the year.
Even with Tuesday’s deal, there is still a tough road ahead. The full Senate would need to vote on the budget and it would then need to align with the House version, which was voted out of committee earlier this year.
That may prove a tricky task, since House lawmakers may be more reluctant to enact tax cuts that would add to the deficit.
Still, any tax cut may wind up being temporary. Under existing Senate rules, Republicans can pass legislation with a simple majority only if the bill is not found to add to the deficit after a period of 10 years. That means all — or part — of the tax legislation could expire after a decade if official estimates of the costs do not align with Republicans’ optimistic economic growth projections.
Republicans on the Senate Budget Committee have been wrestling for weeks over how big a tax cut is feasible and have been under pressure to reach a budget deal this month so that the work on tax legislation can officially begin in October. Still, while the Republicans may coalesce around a $1.5 trillion tax cut, the details of the actual plan remain fraught with lawmakers divided on some key issues such as the corporate tax rate and which, if any, deductions will be eliminated or scaled back.
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Some details of the plan are expected to be released next week when the “Bix Six” working group of Republican congressional leaders and the White House economic team outline their policy framework.
President Trump said this month that the wealthiest Americans might end up paying a bit more in order to lower tax bills for the middle class. A White House official said on Tuesday that while the rich would not see a benefit from the tax plan no final decisions on top rates had been reached.
Republicans have been wary of sharing too many details given the intense lobbying crush that is expected once it becomes clear which industries stand to win or lose valuable provisions currently ingrained in the tax code. Those include things like the mortgage interest deduction and the deduction for charitable donations.
Financing tax cuts through deficit spending essentially means the government will borrow money to pay for tax reductions, rather than finding spending cuts to make up for the lost revenue.
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Such a move would add to an already-hefty debt load that is only expected to grow as an aging population drives additional spending on retirement and health programs. The C.B.O. estimates that within 10 years, the federal debt will rise to its highest percentage of gross domestic product since just after World War II.
Republican lawmakers, who for years have complained about the country’s deteriorating fiscal situation, are now turning to arcane budget arguments and making the case that tax cuts will unleash enough economic growth to compensate for lost revenue.
“Just going from 2 to 3 percent growth adds about $14 trillion of economic activity over a decade, $2 to $3 trillion of revenue to the federal government,” said Senator Ron Johnson, Republican of Wisconsin and a member of the Budget Committee.
Senator Orrin Hatch of Utah, the Republican chairman of the Senate Finance Committee, said he continues to worry about the deficit. But he supports a budget that provides maximum flexibility to produce a tax overhaul that will move America forward.
“We’re definitely in need of something that will stimulate the economy,” Mr. Hatch said.
Whether a big tax cut can stimulate an economy already saddled with debt is at best uncertain and many experts think it will actually stifle growth.
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At a hearing of the Senate Finance Committee on Tuesday, Donald Marron, director of economic policy initiatives at the Urban Institute, warned that deficit financed tax cuts could prove to be a drag on the economy.
“You should always think of these tax reform proposals as a race between the effects of the tax changes and the effect on the budget,” Mr. Marron said. “There is a cost to deficit financing.”
Anti-deficit groups say they plan to remind Republicans who railed against deficits during the Obama administration of their past criticisms.
“The president and members of Congress have spent years warning of our large and growing national debt and have said their goal was to pursue tax reform that doesn’t make that debt worse,” said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget. “It is extremely disheartening that the Senate budget may be abandoning that commitment.”
The tax cuts, she added, “could result in debt as large as the economy in just over a decade and take us into uncharted waters after that.”
Michael A. Peterson, president of the Peter G. Peterson Foundation, said that the national debt topping $20 trillion should not be an invitation for Republicans in Congress to exacerbate a problem that they were elected to fix.
“Irresponsible tax reform is counterproductive and anti-growth because increasing the national debt hurts the economy. Tax reform should grow the economy, not the debt,” Mr. Peterson said. “This proposal fails the test of fiscally responsible tax reform.”
Wary of any tax legislation that benefits the rich, Democrats have taken a firm stance against Republican policies that would add to the deficit and said they will not support a bill that does not pay for itself.
Senator Ron Wyden of Oregon, the ranking Democrat on the finance committee, warned against a proposal that would provide a “sugar hit” of economic growth and a painful hangover in the coming years.
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“We’ve seen this movie before,” Mr. Wyden said, referring to previous Republican tax cuts. “It is a prescription for more trouble in the American economy in the long term.”
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Article source: https://www.nytimes.com/2017/09/19/us/politics/senate-republicans-tax-cut.html?partner=rss&emc=rss
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