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How Likely Is GOP Tax Reform, Near Term?

Zacks

Tuesday, November 7, 2017

The mood on Capitol Hill has gotten palpable: the first major U.S. tax reform bill in 31 years might be mere weeks away. Republicans, who hold a slight majority in the Senate and a larger one in the House, already understand they will get little or no help from congressional Democrats on this hotly contested issue. Slashing the nominal corporate tax rate from 35% to 20%, while at the same time ratcheting up a higher tax bracket for the country’s biggest money-makers to nearly 40%, are two of the most talked-about features of the new reforms.

President Trump wants a deal done by Thanksgiving, which even the most optimistic on the Hill see as unlikely. House Speaker Paul Ryan looks toward the more-realistic Christmas break for passage. But the biggest challenges among GOP lawmakers might not be their opponents on the other side of the aisle, but within their own party.

Initial reads on the tax reform law compute that it will add $1.5 trillion to the National Debt. From a political party that has voted most of the past decade for avoiding increases to U.S. debt, this may be a hard-sell, especially among deficit hawks — most of whom reside in the Libertarian wing of the Republican Party. Fox News yesterday quoted one House Republican’s opinion of the new tax proposal: “I think it sucks.”

That said, the GOP can afford to lose 22 votes from their own party in the House and still pass the bill. Their margin is slimmer in the Senate — only 5 votes — which is made even more difficult by dissension from senators currently at odds with President Trump of late, for various reasons: Senators McCain and Flake from Arizona, Senator Corker from Tennessee, Senator Murkowski from Alaska and Senator Collins from Maine. Add in the serious injuries on Senator Paul from Kentucky over the weekend, and suddenly the numbers do not add up.

Following policy change fails on immigration reform and healthcare reform, Republicans are starting to feel a little hot under the collar with midterm elections already coming up next year. The 2016 surprise win by President Trump in the General Election, along with further congressional increases for the GOP, was thought to be a major boon for ushering in conservative policies on the federal level after two full terms served by President Obama. But thus far, the party that has proven itself adept at winning elections has not had much, if any, success governing on the national level.

Trump’s arbitrary mandates aside, the GOP-led Congress is not bound to pass any tax reform legislation before the end of the year. Indeed, such far-reaching changes like corporate and individual tax reform have historically taken years to win passage, such as 1986’s historic success for the Reagan administration. But Republicans are hearing the clock ticking loudly: not only to prove they are capable of getting legislation passed, but also considering the continuing investigation into whether the Trump campaign colluded with agents of Russian President Vladimir Putin — an investigation which has already claimed the scalp of one Trump campaign operative.

Mark Vickery
Senior Editor

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