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Trump sets off a GOP tax cut scramble

Posted at 4:57 PM, Oct 23, 2018

President Donald Trump couldn't get Obamacare repeal, an infrastructure plan or a border wall, but there's one big wish-list item he's succeeded in conjuring into reality: tax cuts.

The greatest policy success of his first year in office was passing a landmark tax reform, something the Republican Party hadn't been able to do despite decades of trying.

Now, with only two weeks left before voters go to the polls, he's promising middle-class voters another tax cut, with a plan coming before the midterms -- though his fellow Republicans in Congress, which is in recess through the election, have said they aren't aware of any such proposal already in the works.

Speaking in the Oval Office on Tuesday, Trump said a "resolution" would be introduced in Congress next week outlining a "pure 10% tax cut" on top of what middle-class Americans received last year.

His comments came a day after he promised at a rally in Texas that the top Republican tax-writer in Congress, House Ways and Means chair Kevin Brady, was already at work: "It's going to be put in next week. Ten percent tax cut. Kevin Brady is working on it. We have been working on it for a few months. That is in addition to the big tax cuts you have already gotten."

Brady's office, after initially referring questions to the White House, said in a statement Tuesday that a plan is in development -- and suggested that it would be passed if the GOP can maintain control over both the House and Senate. "We will continue to work with the White House and Treasury over the coming weeks to develop an additional 10% tax cut focused specifically on middle-class families and workers, to be advanced as Republicans retain the House and Senate."

So far, the White House has offered no concrete details on the fresh tax proposal or how it would be paid for amid a ballooning federal deficit as a result of last year's $1.5 trillion tax cut and a massive spending bill. Peter Navarro, one of the President's top trade advisers, told CNN chief business correspondent Christine Romans on Tuesday the White House is considering a proposal that would be "revenue neutral," adding a tax cut for the middle-class would be a "really good thing for this country."

Trump's tax comments, starting over the weekend, sent Washington into a frenzy of trying to figure out what he was talking about.

Aides on Capitol Hill scrambled to figure out what he meant -- and in the House, sent them scrambling to figure out if they could, or even needed to, draft something that would address what the President was promising. In the Senate, GOP officials said calls and e-mails were sent to their House counterparts for guidance this past weekend, only to find out there wasn't any -- nobody was sure what exactly the President was referencing.

With both chambers still under Republican control, legislative proposals can move quickly if prioritized by leadership, including bypassing the committee process altogether. But there are currently no plans to do anything of the sort, the aides said -- primarily because nobody has pinned down what, exactly, the President wants.

"Your guess is as good as mine," said one senior House GOP aide. As to whether something could eventually happen? "I guess," the aide said. "But it's not like we don't have a lot on our plate after the election."

The President's top economic adviser, Larry Kudlow, sought on Tuesday to temper expectations, suggesting a tax cut may not materialize for some time.

"It may not surface for a while," Kudlow told reporters in a driveway gaggle. "But that's his goal. That's his policy intent. I don't see anything wrong with that."

Kudlow nevertheless stressed that Trump managed to get his first tax cut through, too, against expectations.

"Take him seriously when he comes out with these things," Kudlow said. "That's been his pattern for a long time. People should not underestimate that."

The whole episode echoes almost note-for-note the origin of Trump's first tax bill, which originated with a promise by the president to unveil details of a historic tax overhaul plan in "one week" ahead of his 100-day mark in office.

At the time, most people knew that staff at Treasury had yet to begin substantial work on anything. The 2017 tax reform was initially introduced as a one-page summary by Treasury Secretary Steven Mnuchin and then-National Economic Council Director Gary Cohn in a hasty April 2017 White House briefing room appearance -- but that document was written into the plan that ultimately passed Congress and landed on Trump's desk in December.

"Trump benefitted by a lot of work that was done already by the House GOP led by Kevin Brady and Paul Ryan," said Kyle Pomerleau, an economist at the Tax Foundation, a non-profit think tank in Washington. "I am not sure I can give this method credit. Tax reform had been on the minds of Hill staffers for a while by the time Trump announced the details were coming."

The President's latest tax pitch appears strategically designed to rally Republican voters ahead of the midterm elections next month. GOP leaders have been increasingly frustrated that last year's tax cuts aren't resonating with Americans as much as they hoped.

Messaging by Democrats that the administration's tax law was overly generous to the rich and big corporations appears to have won over public opinion, polls show.

"If the President had only talked about our actual tax cut for the last year, he wouldn't have to be proposing a fake one now and our members would be in far better shape," a senior Republican congressional aide told CNN late Monday night.

Top administration officials have repeatedly tried to sell last year's tax cut as a lift for middle-class Americans' pocketbooks.

"You know, we've already given the middle class, with an income of $75,000, you got about a $2,000 tax hike, and you're going to get a wage increase," Council of Economic Advisers chairman Kevin Hassett said Tuesday in a call with reporters. "He's saying ... now, that after the election he's going to pursue giving people an additional 10% tax cut."

But comments by Navarro in his CNN interview Tuesday underscored the sweep of the corporate elements in the package.

"For me, the beauty of the Trump tax cut was on the corporate side," said Navarro in an interview. "As somebody who watched with dismay over a decade have our jobs move off shore in part because of unfair trade practices but also in part because of a high corporate tax rate here, it was really great to get that corporate tax rate down to 21 percent."

Trump has in recent days expressed his dissatisfaction that the fallout over dissident Saudi journalist Jamal Khashoggi's death has eclipsed his efforts on the campaign trail, multiple sources with knowledge of the situation told CNN.

The tax idea surfaced publicly over the weekend, with Trump's initial comments on Saturday amplified by Treasury Secretary Steven Mnuchin in an interview with The New York Times in Israel. Mnuchin said he's been working on a tax plan with Brady that would be unveiled "shortly."

He described the new initiative as "different" than a tax bill that that passed the House earlier in the September to make individual tax cuts permanent. They are currently set to expire in 2025.

Tax policy analysts were left to surmise possible explanations of what the President meant, with the prevailing view being that Trump was referring to a $100 billion tax cut that would link capital gains taxes to inflation.

Earlier this summer, Mnuchin said Treasury was looking into whether the agency could use its regulatory powers to make a unilateral change on capital gains, bypassing Congress.

But Trump made clear on Monday, en route to the rally in Houston that he had no intention of bypassing Congress: "We're putting in a resolution sometime in the next week-and-a-half or two weeks."