5 obstacles facing the GOP tax agenda

The House voted Tuesday to pass a budget resolution that will act as the blueprint for the GOP’s domestic agenda, with the extension of President Trump's 2017 tax cuts at the center.

While the bill managed to clear the GOP's razor-thin House majority, the road map it lays out for the reconciliation process, which will avoid a Democratic filibuster in the Senate and allow a party-line vote, faces opposition on multiple fronts. Obstacles are mounting both within the GOP conference and outside of it.

“We’re working to codify President Trump’s agenda. We can’t allow a future administration to unwind all of these important reforms,” Speaker Mike Johnson (R-La.) said Tuesday.

Here are five hurdles facing the GOP as it seeks to cut taxes and move ahead with other parts of its agenda, including increasing fossil fuel extraction and curbing migration.

Budget cuts and Medicaid

Extending the Trump tax cuts, which expire at the end of this year, will cost $4.7 trillion over the next decade, according to the Congressional Budget Office (CBO), the official legislative scorer.

That number doesn’t take into account the additional tax cuts proposed by Trump while he was campaigning, which could add trillions more to the cost of the bill. Those measures include creating a tax credit for family caregivers, canceling taxes on tips and overtime pay, exempting Social Security benefits from taxation, and creating a special deduction for interest on loans taken out for automobile purchases.

To help pay for all of these cuts — which could cost as much as $7 trillion, according to some estimates — Republicans are aiming to trim $2 trillion from the budget, with nearly half of that amount coming from the House Energy and Commerce Committee, which has jurisdiction over Medicaid.

“That’s where the money is,” Energy and Commerce Committee member Rep. Russ Fulcher (R-Idaho) told The Hill.

Cuts to Medicaid are a stumbling block for GOP moderates and conservatives alike, who represent districts that make ample use of the federal health care program. Medicaid also ranks favorably in public opinion polls, making health care cuts a difficult sell with the electorate. In one recent poll from the left-leaning Groundwork Collaborative nonprofit, 79 percent of respondents had a favorable view of Medicaid.

On the other side of the spectrum, GOP budget hawks are demanding greater deficit reduction from the reconciliation package.

“They convinced me in there. I’m a ‘no,’” Rep. Thomas Massie (R-Ky.) said Tuesday morning after meeting with fellow Republicans. “If the Republican plan passes, under the rosiest assumptions, which aren’t even true, we’re going to add $328 billion to the deficit this year.”

The SALT deduction cap

The state and local tax (SALT) deduction cap is among the thorniest tax issues within the Republican conference. The deduction is popular among Democrats and Republicans from higher-tax blue states, allowing a larger write-off for high earners.

Trump on the campaign trail said he would work to “get SALT back,” suggesting he would support doing away with the $10,000 cap on the deduction that was put in place as part of his 2017 tax cuts. Getting rid of the cap could add as much as $1 trillion to the deficit.

Various increases have been proposed for the cap, including doubling it to $20,000 or trebling it to $30,000, but there’s no concrete plan for it yet.

“We’re working through it,” Rep. Mike Lawler (R-N.Y.) told The Hill earlier this month. “It’s all part of the negotiation, but the President has made very clear that it’s a priority for him. It’s on his tax priorities list.”

Pushback on budgetary accounting

The House budget resolution caps the amount that the GOP tax cuts can add to the deficit over the 10-year budget window at $4.5 trillion — less than the cost of the Trump tax cuts at $4.7 trillion, which is only one part of the GOP tax cut agenda.

“Let me just say that a 10-year extension of President Trump’s expiring provisions is over $4.7 trillion, according to CBO. Anything less would be saying that President Trump is wrong on tax policy,” House Ways and Means Committee Chair Jason Smith (R-Mo.) said, criticizing the House budget resolution earlier this month.

To paper over the likely deficit expansion, Republicans have been trying to sell two alternative accounting methods that would shrink the top-line number. One, known as working from the “policy baseline” as opposed to the legal baseline, assumes the 2017 tax cuts are not expiring — which they are — wiping out the costs of the GOP effort to extend them.

Sen. Bill Cassidy (R-La.) filed an amendment last week to a Senate budget resolution week that called for striking references to this type of accounting, and Rep. David Schweikert (R-Ariz.) has referred to it as intellectually fraudulent.

The other, referred to as dynamic scoring, takes macroeconomic growth resulting from tax cuts into account. While tax experts say changes to corporate taxes can stimulate production levels, few believe individual tax cuts have the same impact.

“Everybody in my profession agrees with me … 99.9 percent of economists do not believe that there’s going to be so much growth that it would offset any cost,” Martin Sullivan, chief economist at Tax Analysts, told The Hill last year.

The Senate is moving its own legislation

The Senate is moving ahead on its two-track legislative plan for the GOP agenda. Senate Republicans want to split the agenda up into two reconciliation bills, with the first focusing on energy and fossil fuel extraction, along with border security measures, and the second focusing on tax cuts.

Budget reconciliation bills, which can make it into law with a simple majority but have additional procedural and content restrictions, are time-consuming legislative vehicles, and it’s difficult to do more than one in a year.

Trump has repeatedly endorsed the House plan to pass the GOP agenda in one bill, but the Senate is pressing ahead with its legislation nonetheless. GOP senators have communicated to the House they don’t want the 2017 Trump tax cuts to simply be extended, but rather to be made permanent.

"We're always rooting for the House to succeed, with the understanding that their plan will take more time to enact," one senior GOP Senate aide told The Hill. "In any case, the Senate's targeted budget resolution is primed and ready to go."

Democratic opposition

Facing so much internal conflict, Republicans have made some overtures to Democrats about getting them on board with some of their tax cuts. Trump even said earlier this year he was working with Democrats on the 2017 tax cut extensions, arguing their expiration would be as bad for Democrats as it would be for Republicans.

Democratic leadership and top Democratic tax writers — including House Minority Leader Hakeem Jeffries (N.Y.) — have expressed skepticism about Republican willingness to work across the aisle on a viable bipartisan tax package.

Jeffries wrote a letter to his colleagues Monday ahead of the possible GOP vote to lock down Democratic opposition to the GOP budget resolution.

“Given the expected closeness of the vote, it’s imperative that we are present with maximum attendance,” Jeffries wrote. “We must be at full strength to enhance our opportunity to stop the GOP tax scam in its tracks.”

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