Three Reasons Why the GOP Tax Reform Effort Could End in Tears
Policy + Politics

Three Reasons Why the GOP Tax Reform Effort Could End in Tears

REUTERS/Aaron P. Bernstein

Taking the same action over and over again in the hopes of achieving a different result is usually seen as a bad strategy, if not a sign of deeper problems, but that doesn’t seem to be deterring the leadership of Congressional Republicans when it comes to their legislative schedule.

Fresh off a humiliating defeat in their seven-year quest to repeal and replace the Affordable Care Act, GOP leaders are apparently defying President Trump, who wants them to take another shot at passing one of the various bills that were left over last week after the Senate failed to pass three consecutive bills that would have at least allowed its members to claim that they had partially repealed the ACA.

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Rather than lead another assault on the health care law, as the president wants, Republican leaders in Congress are instead moving on to the GOP’s other top priority: rewriting the US tax code. However, the party’s leadership appears to be making the same mistakes they did in the effort to repeal the ACA. Senate Majority Leader Mitch McConnell has preemptively ruled out working with Democrats to get a tax bill passed, meaning that as with the ACA repeal process, he will be lashing himself to the mast of the Senate’s budget reconciliation process, which makes a bill immune to the minority party’s filibuster, though at the cost of some legislative freedom.

And reflecting their hunger for some sort of legislative victory in a session that has so far been without one, GOP leaders are insisting that they will complete that massive task by the end of the year -- presumably squeezing in a debt limit increase and a 2018 budget resolution at the same time.

Further, McConnell has, so far at least, offered his fellow Republicans very little in terms of the details of a tax reform package. As with the ACA repeal project, the details of the tax reform package are being negotiated practically in secret. Among the few scraps of information doled out to the public was a statement last week from the “big six” -- the top GOP leaders of both the House and Senate as well as Treasury Secretary Steven Mnuchin and White House economic adviser Gary Cohn.

The only substantive piece of information the statement provided was an indication that leaders have given up on the idea of installing a border-adjustable tax that would give favorable tax treatment to exported goods over imported ones. Beyond that, it was a vague statement about agreements having been reached behind the scenes that will allow the House Ways and Means Committee and the Senate Finance Committee to begin drafting bills.

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There are at least three major reasons why the push to pass a tax bill in haste could end in tears, just as the ACA repeal effort did.

Lawmakers Don’t Like Being Shut Out of the Process

McConnell has promised that there will be hearings eventually, but GOP lawmakers are already complaining that they have no insight into what leadership is going to propose and are therefore unable to speak to their constituents about how the party is planning to go about achieving one of its top priorities.

GOP House members can at least return to their districts and claim that they passed an ACA repeal bill, even if the Senate failed to hold up their part of the bargain. But members of the Senate have no such luxury. They must go home in August and effectively admit that -- just as with the failed ACA repeal effort -- they are not really part of the legislative process.

By giving their members no ownership of the process, leaders also give them less reason to feel loyalty to whatever legislative package eventually surfaces. And because McConnell has once again decided to walk the budget reconciliation path, virtual lockstep loyalty is the only way that 52 Republicans senators can get a bill through the chamber on a majority vote.

Related: The Big Risk Trump Is Taking by Threatening Congress’ Health Insurance

This Is More Complicated than Health Care

There is a reason why Congress hasn’t passed a major tax reform package in more than three decades.

President Trump once memorably bemoaned the complexity of health care legislation, saying “nobody knew” how involved the process would be. Of course, practically everybody knew how difficult an issue health care reform would be. And those with any insight at all into the legislative process know that tax reform is even more difficult.

That’s because, as fraught as the debate over the ACA was, its major provisions did not actually impact a large percentage of Americans. Most Americans who aren’t on Medicare receive health insurance through the employer of a family member. The number purchasing insurance on the individual markets is relatively low.

The tax code, however, sends its tentacles into every household and business in the country. The number of advocacy groups mobilized to defend entrenched interests in health care will be tiny compared to all of those who have some stake in the tax reform process. And if history is any guide, the pressure on members of Congress to protect hundreds, if not thousands, of specific tax breaks currently in the system will be intense.

Related: Will Trump Try to ‘Overrule’ Monetary Policy?

The Temptation to Eat Dessert First

There have already been rumors suggesting that rather than trying to pass a truly comprehensive piece of tax reform legislation, GOP leaders may fall back on a much more limited agenda -- cutting rates for businesses and individuals, and doing away with some of the tax code’s more politically toxic elements, such as the estate tax.

The problem here is not that such a move couldn’t get passed. In fact, it could be drafted in a way that would make it very difficult for lawmakers to oppose -- even if the measures had to be to satisfy reconciliation rules.

The trouble is that by wrapping all of the relatively easy provisions together and passing them, congressional leaders would be giving up the leverage they need to address more controversial elements of the tax code. For example, doing away with subsidies to large energy companies would be easier if those companies could be told that they are getting a business income tax rate cut in return. Give them that rate cut first, though, and they will feel free to dedicate their considerable lobbying talents -- and budgets -- to defeating efforts to strip away their subsidies.