GOP wants to push to extend Trump’s tax cuts after midterm elections

Republicans plan to push to extend key elements of President Donald Trump’s tax cuts if they win control of Congress in this fall’s election, in a bid to force President Biden to codify trillions of dollars of tax reduction touted by his predecessor.

With Democrats likely to lose control of the House of Representatives and possibly the Senate, Republicans are gearing up to advance legislation that would make permanent the GOP’s 2017 changes to tax rates paid by individuals. Republican officials will also push to remove some of the specific corporate law tax increases that were designed to offset the cost of their huge overall corporate tax rate cut.

Less than a month and counting until mid-November term

Many economists say GOP plans to expand tax cuts run counter to their promises to fight inflation and cut the federal deficit, which have become central themes of their campaign rhetoric in midterm of 2022. Tax cuts spur inflation as do new spending because they increase economic demand and throw it off balance with supply. But Republicans say they believe those efforts would put Biden in a political bind, forcing him to choose between vetoing tax cuts — giving the GOP a line of attack in the 2024 presidential election — or allow Republicans to win on one of their central legislative agenda items. .

Newt Gingrich, who served as Speaker of the House in the 1990s and is in communication with top Republican leaders, said a similar strategy was successful in forcing Bill Clinton and Barack Obama to pass tax cuts they would not have otherwise supported after these two Democratic presidents lost control of Congress.

Biden will likely find himself in a similar position, Gingrich said.

Republicans see the 2017 tax bill like Democrats see Obamacare: As a landmark achievement, they will fight to keep it

“The trick is to put the president in a position to either be defeated in 2024 or sign your stuff,” Gingrich said. “Republicans will make pursuing Trump’s tax cuts a priority because it puts Democrats in a position to be for tax increases and against economic growth.”

Rep. Adrian Smith (R-Neb.), one of the candidates to lead the Ways and Means Committee in a GOP House, told C-SPAN last month that the first legislation he would seek to make moving forward would be to extend the 2017 GOP tax reductions to individual taxpayers.

Without a filibuster-proof majority, Republicans would likely have to pull out several Democrats to push such measures through the Senate to force Biden’s hand.

“We have temporary tax policies that have been good for the middle class – we need to make them permanent,” Smith said.

The White House said in a statement it was undeterred by GOP plans to push for extending Trump’s tax cuts and was prepared to resist efforts to extend the law. .

“As President Biden and congressional Democrats fight to make middle-class families the heart of our economy. … Republicans want to sell these families to wealthy special interests and doubling down on their 2017 tax giveaway to the ultra-rich and corporations,” White House spokesman Andrew Bates said.

The fight against Trump’s tax cuts could become a key part of a divided government if Republicans take control of one or both branches of Congress. Congressional lawmakers and the White House will need to reach agreements on government funding, avoiding a breach of the debt ceiling and other spending bills — negotiations that will give the GOP an opportunity to apply pressure on his political demands. Democrats used control of the House after the 2018 midterm elections to push Trump to agree to many of their priorities, such as increased domestic spending and paid furloughs for federal workers.

Corporate America is fighting its first battle over the future of Trump’s tax cuts

GOP plans to push hard on tax cuts have become more visible in recent weeks. House Minority Leader Kevin McCarthy (R-Calif.) released an economic plan last month that says the party backs legislation led by Rep. David Schweikert (R-Arizona) that would make much of the Tax Act 2017 – including doubling the standard deduction claimed by most taxpayers and reducing the maximum rate paid by most taxpayers from 39.6% to 37%. McCarthy’s plan also calls for the enactment of Rep. Jason T. Smith’s (R-Mo.) plan to make permanent a 20% deduction claimed by companies operating as flow-through entities, as well as a half- dozen other GOP bills aimed at tax incentives for start-up companies, tax breaks on intellectual property transferred to the United States, business interest deductions and other measures to make permanent or adopt new new tax breaks for businesses.

Senate Republicans also broadly support those efforts, according to interviews with half a dozen congressional aides and outside policy experts.

“It will be a battle royale in Washington over the next year over which Trump tax cuts will be extended,” said Stephen Moore, Trump’s economic adviser and many top congressional Republicans. “That will be a central and driving theme of the Republican Congress – making these tax cuts permanent.”

The legislative battles could begin before the end of this year. Republicans are already calling for the extension of three corporate tax breaks — including two that expired late last year and a third that begins to expire next year. Collectively, these three measures would add an estimated $600 billion to the federal deficit over 10 years if extended, according to nonpartisan estimates, exceeding the cost of Biden’s student debt relief package (which many Republicans have criticized). and increasing federal spending at a time of high inflation.

The 2017 GOP tax cut centered on a massive reduction in the rate paid by corporations, the cost of which was partially offset by the end of corporate tax breaks in the hope that lawmakers would later prevent their elimination. . Democrats tried to raise the corporate tax rate as part of their economic legislation this year, but failed largely because of opposition from Sen. Kyrsten Sinema (D-Arizona). Instead, they passed a minimum tax only on very large corporations.

The wealthiest Americans get a $33,000 tax break under the GOP tax law. The poorest receive $40.

“Republicans didn’t want to look like they were giving too much to businesses, so they expired some of the trade relief and offset some of it with business tax increases,” said Steve Rosenthal, policy analyst at the Tax Policy Center, a nonpartisan think tank. “Now to return and extend corporate relief and reverse the increases would mean tilting our tax system more towards the rich and powerful.”

Republicans also plan to push for government spending cuts, though the exact contours of that policy seem less clear. The Bloomberg government reported Tuesday that the four House Republicans seeking to lead the House Budget Committee were all exploring changes to Social Security and Medicare to reduce federal budget costs, seeking to use the debt ceiling or government shutdown to force the problem.

But analysts say the extension of tax cuts is more likely to be associated with spending increases sought by Democrats. Senate Finance Chairman Ron Wyden (D-Ore.) said in a statement, for example, that additional tax relief for businesses should only be passed if Democrats secure funding for one of their political priorities, such as Biden’s child tax credit.

This combination would increase the deficit even more than would simply increase spending or reduce taxes alone.

“What worries me is the kind of horse trade where Republicans get tax cuts, Democrats get expanded tax credits, and the American people are stuck with the bill,” Marc Goldwein said. , senior vice-chairman of the Committee for a Responsible Federal Budget, a nonpartisan think tank that advocates for deficit reduction.

Yet the GOP’s push for tax cuts could also undermine their claims to be determined to bring down inflation. Jason Furman, a former Obama administration economist who has criticized Biden’s spending record, said the GOP’s plans would raise inflation at a time when price increases are the fastest in decades.

GOP Midterm Bet: Voters Will Care More About Inflation Than Abortion

“The corporate tax cuts that Republicans are pushing would add to inflation, add to the deficit, and do little or nothing for economic growth,” said Furman, now a Harvard professor. “They were a budget gimmick to begin with. Extending them without paying for them now would be like doubling the original gimmick.

But Republicans say they are determined to extend the cuts. “The Tax Cuts and Jobs Act has provided real and substantial relief to families and businesses,” said Rep. Jason T. Smith (R-Mo.), a senior member of the budget committee of the Chamber, in a press release. “We must build on this success by making permanent policies that support families and workers while considering what remains to be done for the tax code.”

Jacob Bogage contributed to this report.

Comments are closed.