Trump courts Democrats as Republicans ready tax reform

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Congress’ next big legislative push — tax reform — is about to
take off. But in speaking to reporters and Democrats this week,
President Donald Trump appears determined to shake up the
Republican Party’s game plan before it even begins.

Possibly annoyed with how his other legislative initiative —
healthcare — could not pass on a pure party-line vote and
exuberant about how some of his recent bipartisan overtures have
been portrayed in the media, Trump has sounded as if he’s ready
to make a few concessions Democrats say are necessary in order to
play ball on tax reform.

This week alone,
Trump discussed tax reform with Democratic lawmakers at a trio of
meetings. Following one with a bipartisan group of congressmen,
Trump told reporters that “the rich will not be gaining at all
with this plan” and that he thinks “the wealthy will be pretty
much where they are.”

“If we can do that, we’d like it. If they have to go higher,
they’ll go higher, frankly,” Trump said. “We’re looking at
the middle class and we’re looking at jobs.”

Speaking with reporters aboard Air Force One later in the week,
Trump pointed to how healthcare legislation was thwarted after
Republican Sen. John McCain voted it down. He signaled that if
Republicans aren’t a sure bet to stay unified in a policy matter,
he’ll “have to do more and more” with Democrats.

“If [Republicans are] unable to stick together, then I’m going to
have to get a little help from the Democrats and I’ve got that
and I’ll tell you for the tax bill I would be very surprised if I
don’t have at least a few Democrats,” he said, adding, “I do
believe we’ll have some Democratic votes.”

Senate Majority Leader Mitch McConnell already said the
reconciliation process — requiring just 51 votes — will be
utilized to pass tax reform. In that scenario, Trump does not
need any Democratic votes so long as the Republican front stays
unified.

Trump’s comments on taxes not being lowered for the wealthiest
Americans ran opposite of what his own Treasury secretary,
Steve Mnuchin, said
earlier in the week
, when he noted that many wealthy
Americans will get a tax break as a result of the proposal —
which still has yet to be released, though Bloomberg
reported that the target date
is September 25.


Steve Mnuchin
Steve
Mnuchin.

Alex Wong/Getty
Images


Mnuchin said the
only wealthy Americans who would not see such a break are those
living in California and New York, which is a result of the
deductions for state and local taxes being eliminated as a part
of the GOP plan.

Senate Minority Leader Chuck Schumer, who discussed tax
reform with Trump this week
, said he opposes a bill that will
repeal those state and local deductions as well as one that
eliminates the mortgage interest deduction, another proposal that
GOP leaders have discussed.

“You would affect people who live in high-tax states” by
eliminating those state and local deductions, Howard Gleckman, a
senior fellow at the Tax Policy Center, told Business Insider.
“It’s become kind of a cliche to say those are Democratic states,
but we’ve done an analysis that shows a significant number of
Republican congressmen come from those states. So, I think it’s
going to be much more difficult than they claim it’s going to be
to eliminate the state and local tax deduction.”

“It’s something that they could do if they got the rates down low
enough,” he continued. “But it’s also something I think is very
unlikely.”

Meanwhile, it sounds as if Trump will also not get his desired
15% corporate tax rate — a decrease from the current rate of 35%.
Sen. Orrin Hatch of Utah, one of the “Big Six” working on the tax
reform legislation, said he sincerely doubts that Republicans
will “be able to get to that level on the corporate tax
rates” during an interview with CNBC on
Friday
, though he said he was working to possibly get there.

Republican strategist Matt Mackowiak, president of the Potomac
Strategy Group, told Business Insider that it’s smart for Trump
to negotiate with Schumer and House Minority Leader Nancy Pelosi
on issues that “aren’t going to be done on a party-line basis,
because there is a different threshold there.”


trump mcconnell pelosi schumer
Trump, Mitch McConnell,
Chuck Schumer, Nancy Pelosi.

Kevin
Lamarque/Reuters


But for tax reform, “it appears they still intend to use
reconciliation, which you would only need Republican votes” for,
he said.

“So negotiating with Schumer and Pelosi on tax reform would be
not only unnecessary but would be actually unhelpful,” he added.

Mackowiak added that Trump “feels like some of this bipartisan
stuff has been very good for him the last 10 days.”

“And if worked on other issues, maybe it will work on tax
reform,” he continued. “It could be that he’s not fully aware
that this is really going to be almost entirely Republicans that
will move tax reform.”

Another possibility in Trump’s thinking, Mackowiak said, is that
he might be concerned that hardline conservatives in the House
Freedom Caucus could block the legislation if it does not move
far enough to the right.

Without a bill to dissect, however, the effects of Trump’s
posturing with Democrats remains “a big question,” he said.

“It seems like this is heading to a decision point here on tax
reform,” he said. “And if they are going to stay on the one-party
path, which I generally think makes sense, then they’re going to
need to worry about picking up conservatives, not picking up
Democrats.”

In addition to scrapping the previously mentioned state, local,
and mortgage deductions, Politico reported
last
month that Republicans are seeking to eliminate
businesses’ ability to deduct interest while seeking to phase in
full expensing for small businesses, which would allow them to
deduct investments in new equipment or facilities immediately.
That’s the core of a package that would allow the GOP to drop
both corporate and individual rates, although it’s unclear just
exactly how much they would be able to.

Ideas such as a border-adjustment tax were tossed around earlier
this year, but have since been tossed aside.

Grover Norquist, the nation’s premier anti-tax activist and
president of Americans for Tax Reform, said he’s a fan of where
the effort is at, adding that he’s confident the plan will not be
altered to include things that are unsupportable — a
border-adjustment or value-added tax, or a carbon tax — for him.

“Because those would grow in such a way that they would negate
all the pro-growth aspects that are in the original bill,” he
told Business Insider. “Now, I’ve been assured by everyone in the
‘Big Six’ that neither of those are on the table, neither of
those are ever happening. But that’s something I’d look at in the
long term and say this is not better than nothing, even though it
might look good in some areas, you have planted a seed in an Oak
tree that will overshadow good stuff.”

“It’s like asking what would you like on a pizza for your pizza
toppings other than shards of glass,” he continued. “I don’t care
what else is going on the pizza, because it has shards of glass
I’m not eating it.”

Trump’s recent overtures to Democrats haven’t included such items
that Norquist compared to “shards of glass” on a pizza.

But as Hatch told CNBC on
Friday
, the parties involved are “trying to get on the same
page.”

“It’s much harder than healthcare,” he added.



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