Trump tax plan gaining steam

The White House is planning a massive package of tax cuts and Republicans are setting aside differences and getting together to support President Trump's agenda. This has manifested two developments. First, a tentative deal was reached by Republicans this week to facilitate a cut of about $1.5 trillion in taxes over 10 years. Second the GOP has become more willing to accept the controversial but optimistic estimates of the economic growth that would come out of the tax plan. Trump is striving earnestly for the largest tax cut in US history which is believed to bring a sharp decrease in corporate tax rates and tax relief for the middle class. There are plenty of points of strife still remaining here with Republicans not completely convinced about them. For instance, disagreement remains on the impact of a tax cut on the budget deficit. Looming fights can easily derail the discussions.

In his speech, president Trump stated that the next few days are crucial for the plan's fate as Republicans will try to achieve a legislative victory after multiple defeats and somehow pressurize vulnerable Democrats to negotiate. On Friday, Vice President Pence will speak in Anderson, IN. To highlight the benefits of tax cuts for small businesses in presence of Sen. Joe Donnelly who is up for re-election in 2018 and is open to a deal.

The House Ways and Means Committee Republicans are holding regular meetings from Sunday till Wednesday to narrow down their differences and arrive on common ground on the tax plan. On Wednesday, when the White House and GOP leaders intend to release a 'unified' tax framework; the House Republicans would also meet for a tax briefing but away from the Capitol. This is the fruits of months of methodical negotiations with hope that they can avoid mistakes made when trying to repeal the Affordable Care Act.

Republican leaders are optimistic of getting the tax cut plan approved via 'reconciliation', a Senate procedure that requires just 51 votes. For this, the House and Senate need to pass matching budget resolutions specifying the size and impact of any tax cut measure. The House Budget Committee calls for a tax plan which does not spike a deficit and gets the federal budget balanced by 2026.

The GOP believes that tax cuts would trigger massive growths and generate over $1 trillion as new tax revenue but Congress's budget referees are sceptical of it. Still voting is still pending and defection by three lawmakers is enough to doom the entire tax effort. The key lies in convincing sceptics that the plan would not spike the national debt. For it, the White House wants to bypass the traditional CBO and JCT to decipher the economic impact estimates and is looking to release their own analysis of how the plan would impact the deficit. They believe it to be the tool to counter the arguments to the nonpartisan assessments. This is called 'dynamic scoring.' It however carries many uncertainties like the benefit from tax cuts is not considering the negative implications of the government's debt rising. Traditionally, this has hurt growth and increased government spending on interest payments.

October 21, 2017 - 13:41
Posted in:
0 comments