There's a reason it hasn't been done in 31 years
The White House today went out of their way to show very publicly that this is now their ballgame
The Trump Administration unveiled its long-awaited tax cut proposal – via Treasury Secretary Steve Mnuchin and National Economic Council director Gary Cohn – on Wednesday. The proposal was light on details, and its political future in Congress was decidedly uncertain given the fact that it’s not clear how the tax cut will be paid for.
In search of answers, I reached out to CNN Capitol Hill reporter – and the man with the best hair in the business – Phil Mattingly. Our conversation, conducted via email and lightly edited for flow, is below.
Cillizza: What’s the big headline coming out of the Trump tax announcement?
Mattingly: “Biggest tax cut in history” is certainly the one the White House, just a few days shy of their 100th day, is thrilled about. But I’d go with: The White House has now fully committed to the long, arduous, painful, and likely-to-fail process of tax reform (not very catchy or click-baity, I know.) That’s not a shot at the administration, or the Hill Republicans tasked with turning their principles (or some iteration of them) into a law. The reality is, tax reform is hard as hell. There’s a reason it hasn’t been done in 31 years. The White House today went out of their way to show very publicly that this is now their ballgame, and this is now their big push. So here we go. Game on.
Cillizza: Hill Republicans seem skeptical. What’s the main concern and how broad-based is it?
Mattingly: Put it this way, Republicans are very happy the White House wants to put a ton of energy behind tax reform – they’ll need it if they ever want to get something done. There are serious elements of the plan that track with what Republicans up here have been looking at behind closed doors. But the principles laid out Wednesday are A) super aggressive on the cut side and B) skimpy as all get out on the pay-for side. So for example, if you want to lower the corporate rate to 15 percent, from 35 percent, and lower the rate for pass-throughs (think small businesses, owner operated companies and a hell of a lot of other entities like law firms, hedge funds, etc.) to 15 percent, you’re talking about a cost of around $4 trillion. Now, some Republicans are very clear that they’re happy to rely on economic growth to make up as much of that as possible (history shows it’s right to be skeptical of that as a true avenue to pay for cuts.) But therein lie two problems. First, it shuts down the ability to really make broad-based changes to a system everyone thinks is broken. Second – this is as key as it is wonky – Republicans plan to move tax reform through that ever-popular budget process known as “reconciliation.” Positives: Only need Republican votes to get it through. Negatives: It can’t add to the deficit outside of a 10-year window. Now, if I’ve lost you on this, totally understandable, but the short of it is: cuts that steep, particularly without significant revenue raisers, would almost certainly be fatal in trying to do reconciliation (Haven’t lost you? You’re that one person out there who wants to read more about this? GOOD NEWS)
Just to put a 30,000 foot button on it: House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell have said they want real, permanent, game-changing tax reform. Ryan has put out a plan that is straight-up revenue neutral, comprehensive tax reform. Proposing cuts this steep, and not really giving much indication on how you’d pay for them beyond closing loop holes, cutting deductions and economic growth, makes it far more likely that the White House eventually settles on a “cuts only” strategy, which is the opposite of what top GOP officials want.
Cillizza: Is there ANY circumstance you see where Democrats – even a handful – vote for something like Mnuchin and Cohn outlined today?
Mattingly: No. Dramatic cuts with limited upside for Democrats and their constituencies doesn’t a bipartisan plan make. (Sen. Ron Wyden, the top Democrat on the Senate Finance Committee, put it this way: “This administration is offering cakes to the fortunate few.”) Fun fact: the bill also repeals the state and local tax deduction. That’s a massive deal for states like New York, California and New Jersey. Yes, those are very blue states. (Though I’m sure that’s not breaking many hearts at the White House.) Truth is, Ways and Means Chair Kevin Brady is reaching out to Democrats. He’s hearing them out. The possibility of an infrastructure fund being brought into this, or other very specific things Democrats want may lead some to come to the table. But there’s a reason Republicans are planning to move this through reconciliation. They aren’t planning on Democratic support.
Cillizza: In terms of timeline, Mnuchin says he believes they can get this done by the end of the year. Feasible or pie-in-the-sky? And why?
Mattingly: I would note up front that Mnuchin was saying for months that the timeline was August. For a signing ceremony. Of a full-blown tax reform law. Which was absurd. So credit where it’s due on his part in getting a bit more realistic about things. Mnuchin is now matching up with top congressional leaders. The goal is to get it done this year. I think the possibility they get something done this year is real. But full-scale, once-in-a-generation tax reform? It’s a super heavy lift. There’s a lot of chatter about an eventual fallback to just corporate cuts, which would sunset, and then address individual cuts later (otherwise known as “rates and dates” – think ’01 and ‘03 Bush tax cuts) and I don’t think that’s out of the realm of possibility. (Of note: Ryan and Brady are deeply opposed to this fallback, primarily because as long as it sits out there as an option, it’s tough for others to commit to really going all in on comprehensive reform.)
Cillizza: Finish this sentence: “The chance of something resembling this tax proposal passing the House and Senate is _________.” Now, explain.
Mattingly: Slim-to-none. But that’s more a nod to the reality of tax reform (say it with me: Hard. As. Hell) than these principles necessarily. There is real appetite on Capitol Hill to do this. Brady talks about this like he’s about to line up on the coverage team for a Super Bowl kick off. But cuts this steep won’t fly. And tax reform, at its core, is pain, the goring of oxen etc. Interest groups live and die off these loopholes. And they will flood the Hill with the power (and passion) of a Russ Westbrook-breaking-free-in-the-lane-uncontested-dunk to ensure their status quo is maintained (even as they publicly rail against everyone else’s status quo.) That’s just a lot to overcome. But here comes the hedge: You have a GOP White House with a self-professed deal-maker extraordinaire who loves this issue in the Oval Office. You have a GOP House with a Speaker who has been deeper in the weeds on this issue than most members can dream of. You have a Senate Majority Leader who is thinking of and doing strategic things probably at this very moment that you, or I, or other Senators, probably won’t figure out for another six months. You have a Senate Finance Chairman who, when the opportunity presents himself, has shown himself to be a crafty deal maker. And you have a House Ways and Means Chairman who lives, eats and breathes this stuff and will genuinely do whatever it takes to get it done. Maybe, just maybe, they can catch lightning in a bottle.