Tax lobbyists are worried Congress could endanger highly anticipated tax reform if it uses the first reconciliation bill to shore up immigration and border security funding.
Tax cuts enacted in 2017 by President-elect Trump’s signature bill are set to expire at the end of next year. Lobbyists already believe it will likely take longer to pass tax reform than the GOP originally hoped, and it could take even longer if Republicans opt to hold the tax package for a second reconciliation push.
“To delay is to kill,” warned Grover Norquist, founder and president of Americans for Tax Reform, which opposes tax increases. “And all it takes is one bad car accident or an interesting scandal, and the Republicans don’t have the majority in the House anymore.”
The budget reconciliation process would allow Republicans to pass legislation with a simple majority in both chambers, bypassing potential Democratic filibusters in the Senate.
House Republicans would then need near-unanimous support to pass the bill along party lines, and their slim majority includes a small but vocal contingent of budget hawks that could cause problems. Some House Republicans from New York and New Jersey have also insisted on increasing the state and local tax deduction in another bill, which could be a sticking point for the rest of the conference.
Senate leaders want to start with the border
While tax has been a top priority as the deadline approaches, Senate leadership earlier this month proposed prioritizing a border security-focused package before trying to craft and pass a tax plan through a second reconciliation bill.
A source close to Republican Senate leadership told The Hill that while there have been conversations about what to include in the packages, they are still “trying to figure out what the process is to achieve all of these goals.”
While incoming Senate Republican Leader John Thune (R-S.D.) says he wants to deliver a “big early win” by moving on the border first, without a prepared package to push, both bills will take time to pull together.
“Reconciliation is this two-step process: You do the resolution, and then the committees get to work,” said Rosemary Becchi, former tax counsel to the Senate Finance Committee and current shareholder at the legal and lobbying giant Brownstein Hyatt Farber Schreck.
“There’ll be debate and conversations and things like that and that’ll take some time, and if they get bogged down on any specific point, it only pushes out the next process,” she added on the tax bill. “You’re not writing it from scratch, but there are new issues and new things that will come about in the process.”
Small House majority can mean big problems
Trump didn’t sign the 2017 tax bill until Dec. 22, almost a full year into his first term after Republicans initially tried to pass an ObamaCare repeal bill into law.
Republicans now have a much slimmer majority, which will have to figure out how to extend expiring provisions and fold in Trump’s campaign promises, such as eliminating taxes on tips and Social Security, which could inflate the price tag and risk peeling off critical budget hawk votes.
A spokesperson for Thune, who outlined the two-pronged plan earlier this month, pointed The Hill to his interview with conservative commentator Hugh Hewitt last week in which he said “failure is not an option as far as tax is concerned.”
“What I’ve suggested is a route to secure a big early win that advances the president’s agenda and that is crucial for national security,” Thune said.
While Thune told Hewitt his “goal is to have [taxes] done by summer,” Hewitt took the opportunity to “lobby” Thune to pass the tax cuts “early.” Norquist also stressed the importance of quickly passing the tax extensions to give businesses ample time to plan.
“If you’re a small businessman and you’re trying to decide whether to invest and you don’t know whether it’s going to be expensing in a year, you don’t do it now,” Norquist said.
Still, proponents of the two-track reconciliation plan argue that separating tax and border funding reduces the risk that one large package could sink both priorities.
Norquist made the case for including the 2017 tax extensions to the border reconciliation bill, however, because “these are not new ideas.”
“There’s no secret problem to run into,” Norquist argued.
But Thune told Hewitt that passing pieces of the tax bill in the first reconciliation could make it more complicated to negotiate the second pass.
“If we did that piece early on, my guess is it makes it even more complicated to get the rest of it later because there are a lot of give and takes and trade-offs that occur in these fights,” Thune said.
There is a rift among Republicans on Capitol Hill as to how to approach border and tax using budget reconciliation, and the GOP has a much slimmer majority in the House this time than it did in 2017.
Lawmakers are also having trouble finding common ground on a continuing resolution to fund the government with less than a week until funding is set to expire.
Leaders were expected to release the text over the weekend, but those hopes were dashed as economic assistance for farmers derailed bipartisan talks and prompted a blame game across the aisle.
Trump’s position is unclear
Trump hasn’t come down on a side yet, at least not publicly.
Incoming Senate Budget Committee Chair Lindsey Graham (R-S.C.) and Stephen Miller, who will be Trump’s deputy chief of staff for policy, have both pushed Congress to move first on border security funding.
But Rep. Jason Smith (R-Mo.), who chairs the House tax writing committee, blasted the plan as “reckless.”
“If they do that process, I think that they are creating an opportunity to increase taxes for all Americans,” told Punchbowl News.
Larry Kudlow, the former director of the National Economic Council during Trump’s first term, suggested last week that Thune and Miller had gotten ahead of themselves on pushing first for a nontax reconciliation bill.
“John Thune got a little ahead of his skis. My friend Steve Miller in the White House got a little over his skis on this. Because the boss hasn’t weighed in yet,” Kudlow told Fox Business.
Trump spokespersons did not respond to The Hill’s requests for comment on his position.
A narrow Republican majority in the House remains a hurdle, especially with a bloc of fiscal hawks pushing for federal spending cuts.
The House Freedom Caucus sent a letter last week to Speaker Mike Johnson (R-La.), urging him to move first on “a focused and quick border reconciliation package that is fully offset.”
“President Trump’s agenda will be enacted, and border security must move first — and then we should move forward to a second, larger reconciliation bill covering taxes, spending, energy, bureaucracy, and more,” the House Freedom Caucus board of directors wrote.
While Johnson has signaled he’s open to moving more than one reconciliation bill, whether the Speaker sides with the president-elect’s proxy or his own committee chair remains to be seen.
Despite the threats of infighting, however, tax lobbyists don’t expect Republicans to blow the deadline, even as several predicted they would be working on the bill this time next year.
“There’s no member of Congress that could go home next December without addressing the extenders, because you are talking about a massive tax hike on individuals. There’s just no chance,” Becchi said.
