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Donald Trump won the presidency with talk of sweeping new tax breaks. Now Republicans are grappling with how to make good on his promises — and raising alarms about how difficult and costly that will be.
During a White House meeting with House Republicans earlier this month, Trump made clear his continued interest in three campaign proposals that tilt populist and away from Republican orthodoxy: Eliminating taxes on tips, Social Security benefits and overtime pay. Those would amount to a dramatic expansion of his biggest first-term legislative success, the 2017 tax cut law.
Republicans are already demonstrating that simply extending those eight-year-old tax cuts are a big lift on their own without the added burden of trying to make Trump’s new proposals work.
Sen. John Curtis, R-Utah, told Semafor that enacting Trump’s trio of new tax ideas is going to prove “incredibly challenging.”
“It’s a task to make the math work with the [expiring cuts]. And just speaking for myself and not my colleagues, that’s Mission Number One: preventing the tax increases. You can see that we’re having a difficult time just doing that,” Curtis said. “I’m happy to listen to proposals. But right now, I just don’t see anything out there that allows us to go beyond that.”
It’s an important moment for Hill Republicans, who have accepted almost all of Trump’s early Cabinet picks despite some reservations. So far, Trump has largely deferred to them on the details of enacting his agenda, but that latitude may evaporate as GOP lawmakers try to square the high price tag of his goals with their queasiness about blowing a huge hole in the deficit.
Republican lawmakers are acutely aware that Trump’s poll-tested tax pitches are important to him. And because the president wants to follow through on his promises, some of them see at least a version of his ideas as essential to any successful tax plan.
“It’s something he very much wants to happen, and his support is going to be required” to get a bill done, said Sen. John Hoeven, R-N.D.
Many, but not all, Republicans are coming around to the view that an extension of the 2017 tax cuts for individuals doesn’t need to be paid for, which gives them more fiscal wiggle room for additional tax breaks in what will almost surely be a party-line bill. But few GOP lawmakers want to look like hypocrites with a costly new tax plan after more than a decade of railing against growing debt.
They’re talking about spending cuts to counterbalance a tax proposal, but actually enacting cuts is hard. And debt and deficit politics are not Trump’s forte.
Given that reality, they’ll have to do some educating of their base, the White House and the public about what it means to pay for Trump’s priorities.
“There’ll be a big push to say, ‘How are we going to pay for that? And what are we going to do to make sure that we’re not adding to the deficit?’ So, it’s going to be much harder,” said Sen. James Lankford, R-Okla., a member of the tax-writing Finance Committee.
If Republicans don’t enact Trump’s new tax ideas, Lankford predicted, “the White House will come back and say, ‘I’m not going to sign it if you don’t find a way to be able to do that.’”
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As the House tries to pass one big party-line bill that combines border, defense and taxes, the Senate is moving to separate the border and national security components from tax cuts, which would pass later in the year under their vision.
Other Republicans are floating a more novel approach.
Sen. Ron Johnson, R-Wis., has proposed taking up three bills. That’s how Sen. Roger Marshall, R-Kan., says Trump can get his extra campaign-trail tax breaks.
“Taking three bites of the apple makes more sense. In the second bite, we would make the Trump tax cuts permanent,” Marshall said, while the trio of new tax proposals would likely have to wait until “late summer, early fall.”
Beyond the legislative mechanics of eliminating taxes on tips, Social Security and overtime are looming doubts about how any legislation would work. In the case of ending taxes on tips, a bill that’s not carefully drafted could create confusion, as well as lower rates for tipped workers like waiters than for teachers or other salaried positions.
“We don’t want our electricians to go out and say, ‘It cost $10, but if you tipped me $200, that’s the bill.’ We have to be very deliberate in these things,” said Rep. Greg Murphy, R-N.C.
Summing up the endeavor, he said: “I’m hopeful. I’m not confident.”
Some Republicans are skeptical about even touching Social Security taxes due to strict budgetary rules that limit changes to the program. If Congress can look at ditching Social Security taxes, Sen. Cynthia Lummis, R-Wyo., suggested “we could do a means testing” that would preserve taxes on high-income people.
Along with tariff revenue, she said, that could help mitigate costs.
“I am concerned that, when you start adding all of these together, it is going to get expensive,” she said.
Ending taxes on Social Security benefits, overtime and tips would cost more than $2 trillion combined over 10 years, according to the Tax Foundation. Exempting Social Security would cost about $1.2 trillion, exempting overtime would cost roughly $750 billion and eliminating tax on tips would cost more than $100 billion.
Just extending the 2017 law costs more than $4 trillion. And blue-state Republicans also want to expand the state and local tax deduction, and some Republicans also want to lower corporate taxes.
The View From A GOP Pragmatist
Some Republicans predict that Trump won’t be able to achieve all of his campaign-trail dreams, but he’ll get some of them.
“We probably can’t do all, but one or two of them are probably going to happen, just as a result of the election,” Sen. Chuck Grassley, R-Iowa, told Semafor.
Burgess and Eleanor’s View
The Senate is nearly done with Trump’s Cabinet, shifting Washington’s focus onto his legislative agenda. That is likely to expose new tensions in the Republican Party: Just look at how some Republicans disregarded his push to raise the debt ceiling during last year’s government spending talks.
Casting aside Trump’s campaign pledges on taxes is probably a bridge too far for Republicans.
But given the near-impossibility of doing everything Trump wants while satisfying fiscal hardliners and avoiding politically damaging cuts to popular programs, the president may have to get pragmatic, too.
Notable
- Ending taxes on Social Security could hasten its insolvency, according to MarketWatch.
- The House budget could come to the floor at the end of February, according to Politico. Senate Budget Committee Chair Lindsey Graham told Semafor he hopes his version hits the floor first.