Republicans in disarray
When the week began, Republicans in Washington appeared to have finally come close to scoring a big legislative win. The Republican caucus managed to hold together long enough to pass a budget resolution that will enable a later tax reform package through the simple-majority reconciliation mechanism. President Trump had already turned to the House, urging Republicans in the lower chamber to unite behind the Senate proposal. "We're on the verge of doing something very, very historic," Trump reportedly told the GOP in a Sunday conference call.
Since then, President Trump has lashed out at retiring Sen. Bob Corker (R-Tenn.) on Twitter, prompting Corker to brand Trump an "utterly untruthful president," and to declare that "the debasement of our nation is what [Trump] will be remembered most for." Just a few hours later on Tuesday, Sen. Jeff Flake (R-Ariz.) announced that he wouldn't run for re-election in 2018, and issued a withering critique of Trump from the Senate floor: "It is time for our complicity and our accommodation of the unacceptable to end ... Mr. President, I rise today to say 'enough.'"
It is difficult to see how tax reform manages 51 votes in the Senate if Corker and Flake both abandon Trump. It is equally difficult to imagine America's 45th president handling these criticisms from his GOP colleagues with equanimity and grace. The more likely case is that the GOP will plunge into even fiercer internecine fights that submarine the party's legislative agenda, such as it is.
It's not like the GOP was cruising before this week. Republicans spent the first seven months of the Trump presidency expecting to pass a repeal of ObamaCare at the end of seven years of promises to do so. That historic achievement eluded them as the GOP caucuses in both chambers split on the details, eventually ending in frustration on Capitol Hill and anger among Republican voters over their lawmakers' lack of preparation for governing.
These voters should wonder whether they're in for a rerun when it comes to tax reform. Over the last few days, even before these renewed verbal spats between Corker, Flake, and Trump, Republicans at both ends of Pennsylvania Avenue have been doing more spitballing than ever, with some worrisome results. At times, they give the impression of making it up as they go, which sounds uncomfortably familiar in 2017.
Just as with ObamaCare, Republicans largely agree on the broad strokes of tax reform. Trump ran on the pledge to overhaul the tax code for both businesses and individuals, planning major changes that would stimulate business growth and job creation. In that, Trump sounded very much like a traditional GOP candidate, and down-ticket Republicans echoed the plan in those general terms. They mainly agreed on the need to compress tax brackets, following in Ronald Reagan's footsteps.
That, however, appears to be the extent of their planning. The White House released a framework for tax reform in late September, coincidentally about the same time as the final attempt to repeal ObamaCare went down to defeat. It didn't contain many specifics, and even those it did contain later got changed. For instance, the plan called for three brackets for personal income taxes, with suggested levels at 12 percent, 25 percent, and 35 percent. Last week, however, House Speaker Paul Ryan indicated that a fourth would be added for high-income earners, and Trump said he'd go further if necessary to ensure lower taxes for the middle class. "I want them to get really a lot," he said. "Then I'm going to do a fifth bracket, which will give them more."
No one knows what's in this tax reform package, let alone whether it will bring in enough money to qualify for reconciliation. Meanwhile, several of the country's top Republicans have spent the first half of the week publicly insulting each other.
And again, the actual proposal remains a confusing mess. Simplifying the tax system once meant the elimination of some itemized deductions in a trade-off for a larger standard deduction. At one point that included the elimination of the state and local tax deduction, which in effect buffers the political impact of high-tax policies. That would help balance out cuts against revenues, making it easier to hit the deficit-reduction prerequisite to reconciliation.
However, Trump reportedly objected, and now no one's quite sure whether that will remain in the package. House Republicans from high-tax states have also threatened to scuttle the bill, setting up yet another fight between conservative and moderate factions on Capitol Hill. That split would also be reminiscent of the divisions during the ObamaCare debate.
The need to raise revenue resulted in another White House reversal over the last few days. In order to offset any retreat from eliminating the state-local tax deduction, some members of the GOP caucus proposed a drastic reduction in caps for tax-free contributions to retirement plans. Depending on whether those applied to 401(k) or IRA plans, or to both, the new caps could have resulted in up to a 90 percent reduction in retirement savings each year.
Needless to say, voters didn't expect to have a Republican government come after their own private retirement accounts — especially given all of the GOP's rhetoric about the need to prepare for a future Social Security insolvency. That news prompted so much consternation that Republicans quickly backed away from the proposal. Trump tweeted on Monday morning that "there will be NO change to your 401(k)," hailing the program as a "popular middle class tax break that works."
In other words, the Republican tax reform plan doesn't exist. Even in conceptual form, the general proposal has so many moving parts that it will almost certainly lose GOP votes in whatever final form it does take, especially given the trade-offs necessary to qualify for reconciliation. The specifics will have to get drafted in a hurry by a handful of House and Senate Republicans and then rushed through quickly to prevent any agreement from falling apart. And in case you forgot, two key Republican senators spent the day yesterday publicly berating the president.
If that all sounds familiar, it should. Republicans have promised tax reform for two years on the campaign trail. Clearly they didn't do any better preparing to meet that pledge than they did with ObamaCare — and it shows.