Why a Tax Bill Will Be So Hard

I wrote a piece yesterday entitled Tax Reform and the Politics of Tennessee that highlighted the roles of Sen. Bob Corker and Rep. Diane Black in the next big battle in Washington DC. It was the latest in a series of posts I’ve written about the mechanics of passing a big tax bill through Congress using the budget reconciliation process to avoid a Democratic filibuster in the Senate. Not long after we published that article, more news broke about the difficulties the House of Representatives is having passing a budget, which is something they absolutely must do if they want to use the reconciliation process.

In my piece, I highlighted the fact that Rep. Diane Black is both the chairwoman of the House Budget Committee and intent on becoming a candidate for the governorship of Tennessee. I noted that a 2014 rule adopted by the House Republicans states that Black must relinquish her gavel if she officially declares to run for another office. What I didn’t know at the time was that she had long planned to step down as the head of the Budget Committee by the end of this month anticipating that her work on the budget would be completed by then. In other words, her stalled budget is about to start interfering with her upcoming campaign sooner than I anticipated. And it’s making her uneasy:

The House GOP’s budget chief Tuesday urged House Speaker Paul Ryan to bring the budget to the floor this month, even though her hard-fought fiscal outline lacks the 218 votes needed for passage.

House Budget Chairman Diane Black, frustrated by her party’s divisions, is daring die-hard conservatives to vote no, forcing them to take the fall for choking off the party’s chances at tax reform.

“Sometimes when you get this close, perhaps you just need to put it on the floor,” Black (R-Tenn.) told POLITICO in a 30 minute interview. “I have made the case to the leadership, that I think it’s time.”

“I am restless. I want to have it done,” she said.

She managed to get a budget blueprint passed out of her committee, but the leadership did a whip count last week and discovered that they don’t have the votes to pass it on the floor of the House. The problem is a little hard to describe because it’s partly technical, partly a function of the House Freedom Caucus not fully understanding some of the technical details, and partly a result of Black trying to bullshit and bully the Freedom Caucus. And then that’s all backed up by the potential for the leadership to use a fall-back position that would amount to breaking a promise they made to the Freedom Caucus back in January.

I’ll race through these factors as quickly as possible.

Last year, Congress did not pass a budget. In January, they decided to take advantage of that fact to use the un-passed budget bill as an empty vehicle for creating budget reconciliation directives for the purpose of repealing Obamacare without worrying about a Senate filibuster. Thus, they kind of passed last year’s budget bill at the beginning of this year, but it didn’t actually include the budget stuff. It only included the repeal Obamacare stuff.

This annoyed the Freedom Caucus because they wanted spending cuts in the budget but they agreed to go along with it so long as they were promised that it wouldn’t happen again when they had to vote on this year’s budget bill.

Black actually has produced a real budget complete with big entitlement cuts and everything, but she hasn’t been able to do an honest job because she has no idea what the eventual tax bill will look like. As far as the House Freedom Caucus is concerned, this won’t cut it.

Members of the House Freedom Caucus have refused to back Black’s budget until GOP leaders reveal a comprehensive tax plan.

Asked on Tuesday afternoon whether the Freedom Caucus would support the GOP’s budget on the floor, Rep. Mark Meadows, the chairman of the group, quickly replied, “No,” and said he’s still waiting for tax details.

“I don’t think anything’s changed at this point, other than they’re whipping a lot harder than they were before,” Meadows (R-N.C.) told POLITICO.

Now, since Black is frustrated and “restless,” she wants to call the Freedom Caucus’s bluff.

Black said she believes enough members would feel pressure to change their votes if they saw the bill on the floor.

“Sometimes people will tell you, ‘I don’t know, I’m uncertain,’ and then when they see the votes go up on the board, they’ll see with their own eyes that there’s good support,” Black said.

Her argument is difficult to characterize. On the one hand, she’s as frustrated as I have been that so few people understand that the Republicans have to pass a budget before they can avoid the Senate filibuster. She thinks the Freedom Caucus people are imbeciles who might still be set straight.

On the other hand, her argument is disingenuous, because her budget isn’t real enough to satisfy the Freedom Caucus’s legitimate demands.

“It is a budget. It gives us the vehicle to do tax reform. If you don’t like the tax reform, your vote can be no then. But at least follow the process,” Black said.

Black, who has led a one-woman whip operation on the budget this summer, said [Speaker Paul] Ryan and other members of leadership must link the budget to the GOP’s dream of tax reform.

“I encourage him to do more to make sure that there is an understanding, that in order to do tax reform, you need to do a budget,” Black said. The budget includes instructions for a reconciliation bill that would pave the way for passage of tax reform with just 51 votes in the Senate.

If the House Republicans can’t resolve this standoff, they could theoretically repeat what they did with last year’s budget. They could simply scrap the actual budget and just pass the reconciliation instructions, this time for tax reform. But that would break an explicit promise to the Freedom Caucus, and Black doesn’t think it would fly:

The grim prospects for the House GOP budget have prompted some members close to leadership to float the use of a “shell” budget instead. That would strip out all pieces of the budget — including the $200 billion in mandatory cuts — except tax reform.

If so, it would be the second straight year that House Republicans were forced to abandon their comprehensive budget blueprint in favor of a simpler way to get to reconciliation.

And it’s a largely unpopular idea for the House GOP. Black said she’s talked to many members who feel they were promised a chance to vote on a budget that has “some meat” in it after passage of January’s shell budget to repeal Obamacare.

“I would caution, from my experience only, that a shell budget is going to be difficult to pass in this House,” Black said. “You ask them to do it again, I’m not sure sure that they fall for that.”

Even the way Black characterizes that plan suggests that she knows it’s a sucker’s game. She doubts that the Freedom Caucus would “fall for” it.

So, as of right now, the House Republicans can’t pass a budget. They couldn’t pass a budget last year either, but this time they can’t even pass a shell budget to get around the Senate filibuster.

Black hopes that if the Republican holdouts fully understand that they’re killing any chance of getting big juicy tax cuts they will back down. And she wants a damn vote this month so she can finish her work and start her campaign for governor. For now, though, she’s stuck with a chicken and egg problem that she can’t get the votes without providing the details and she can’t get the details unless she first secures the votes. Essentially, she’s waiting for others to piss so she can get off the pot.

But the hurdles are more daunting than what I’ve described so far. Eventually, the House and Senate will have to come to a complete agreement on the budget, and the Republicans not only have a tiny 52-48 majority in the full Senate, but they have a single-seat advantage on the Senate Budget Committee. That’s where Sen. Bob Corker comes in, because he sits on the Budget Committee and he’s not signing off on some supply-side fever dream accounting to explain away the lost revenue from massive tax cuts.

Unfortunately for Black, the Senate hasn’t even really started serious negotiations on the budget. The only bright spot for her is that Trump made a deal with Pelosi and Schumer that bought the Senate some legislative time and space to get to work:

In the Senate, the Budget Committee chairman, Michael B. Enzi of Wyoming, is still working toward drafting a budget resolution.

“We need to do it pretty soon,” said Senator John Cornyn of Texas, the No. 2 Senate Republican. “I think the president has cleared the decks” with the deal he struck with Democrats to raise the debt ceiling and keep the government funded into December.

“But,” he added, “we need to act pretty quickly.”

Of course, Black has her timeline but it’s not the timeline that will determine if anything ever gets done. If the House and Senate eventually come together to pass a budget, the included reconciliation instructions will be good until September 30th of next year. In that case, it’s likely that Rep. Steve Womack of Arkansas will be finishing the job that Black started and could not finish.

It’s likely Rep. Womack who will have to have a real fight over the details of any tax proposal. For example, Black will probably be campaigning somewhere near Murfreesboro when the House Budget decides whether our nation’s farmers are actually morons.

Congressional Republicans and the White House agree that the tax on inheritances should be scrapped, arguing that it is harming families with small businesses. During a speech in North Dakota last week, Mr. Trump said that it was a “tremendous burden” on the family farmer…

…Democrats scoff at that language, saying the tax hits only the wealthiest Americans. Estates are taxed at a rate of 40 percent, but the first $5.49 million of an inheritance is exempt from any taxation. Couples can leave their heirs as much as $11 million, none of it taxed, meaning only a few thousand wealthy estates face the tax a year.

On Tuesday, Mr. Schumer cited new data from the liberal-leaning Center on Budget And Policy Priorities that projected a repeal of the estate tax would benefit 5,400 of the wealthiest Americans…

…It remains unclear how wedded the White House is to killing the estate tax. In a meeting with Senate Democrats this year Gary D. Cohn, Mr. Trump’s top economic adviser, suggested that only rich people who plan poorly bear the burden of the tax.

“Only morons pay the estate tax,” Mr. Cohn said.

The Republican reasoning goes somewhat like this: Socrates is a farmer; the estate tax burdens farmers; therefore, Socrates is a moron.

Of course, Socrates was a stonemason, not a farmer, and far from worrying about an estate tax, he had to beg for a cock to give to Asclepius.

Also, he wasn’t a moron.

The prospects for a purely partisan tax bill are definitely not looking good and it’s hard to see how they can get it done. If I were advising President Trump, I’d tell him not to waste time in pursuit of it. He can get a tax bill, but he’ll have to get it the same way he got his debt ceiling extended. He’s going to have to ask for something Pelosi and Schumer will approve. It won’t be what the Republicans wanted but it might actually be something he can genuinely be proud of and that he can sincerely tout as a legislative accomplishment.

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