1. Florida Politics

Math problem bedevils GOP tax rewrite

Published Nov. 1, 2017

WASHINGTON — There is a math problem at the root of the Republican delay in introducing a sprawling tax bill, and it grows, in part, from President Donald Trump's two non-negotiables on taxes.

Trump has insisted on "massive" tax cuts, including reducing the top corporate tax rate to 20 percent from 35 percent and delivering a tax cut for the middle class. Both of those goals have proved difficult for the Republicans crafting the House version of the tax bill. They are running into political challenges as they try to offset lost revenue to stay within the confines of the $1.5 trillion tax cut that lawmakers have voted to allow.

The tax rewrite is pitting businesses against individuals, as lawmakers look for ways to offset trillions of dollars of personal and corporate income tax cuts by limiting popular individual tax breaks, including preferential treatment for 401(k) plans and the state and local tax deduction. Business groups, meanwhile, say lawmakers run the risk of putting the United States at a global disadvantage if it does not reduce the corporate tax rate to a level commensurate with other industrialized nations.

The bill, which had been scheduled for release on Wednesday, is now expected to be unveiled today, despite continuing struggles to reach agreement on how to pay for everything lawmakers want to include. Some industry groups familiar with the negotiations said the remaining shortfall was in the hundreds of billions of dollars.

On Wednesday, lawmakers were discussing a potential bandage solution to buy themselves time to figure out the hard math. That solution would call for phasing in some rate cuts over a period of years, and making some cuts temporary, which would lessen the short- and long-term revenue hit.

Trump has resisted a push to reduce the cost of the corporate cut — which is estimated to reduce revenues by $2 trillion over a decade — by phasing it in over time. Rank-and-file Republicans in the House have pushed back against efforts to raise revenues by limiting the amount of pretax dollars Americans can save in 401(k) retirement plans and limiting deductions for state and local taxes paid.

That has set off a scramble to find more revenue.

Trump used his Twitter feed to toss another wrinkle into the deliberations on Wednesday when he suggested once again that Republicans should tie tax legislation to the dismantling of the Affordable Care Act. "Wouldn't it be great to Repeal the very unfair and unpopular Individual Mandate in Obamacare and use those savings for further Tax Cuts," Trump said.

According to the Congressional Budget Office, getting rid of the Affordable Care Act's mandate that most people have health coverage would reduce federal deficits by $416 billion over a decade, in large part because the federal government would end up spending less on subsidized health plans.