GOP chairman outlines plan for phase two of tax cuts

House Ways and Means Committee Chairman Kevin Brady (R-Texas) on Tuesday outlined a “tax cuts 2.0” package, which House Republicans hope to vote on in the weeks before the midterm elections.

House Republicans have been working with the White House on a second package of tax cuts. They see the package as smart politics ahead of the midterms, to help remind voters about the law they passed last year and to expand upon it.

{mosads}But the central feature of the package — permanently extending the 2017 tax law’s cuts for individuals — is unlikely to pass the Senate and may not even get a vote there.

Brady released a two-page framework for the tax package and met with a group of House GOP lawmakers on Tuesday afternoon to discuss it.

“It was just an excellent listening session, [a] first step,” he said.

The proposal has three main components, which will likely form the basis for three separate bills.

The centerpiece of the package is to make the individual tax cuts permanent.

The law’s individual tax changes — which include lower rates, a larger standard deduction and child tax credit, and a new deduction for pass-through business income — expire after 2025. That’s because Republicans used a process, known as “reconciliation,” that allowed the bill to pass with just a simple majority in the Senate but also required the bill to not add to the deficit after 10 years.

The second component of the outline is to boost incentives for savings, such as by creating universal savings accounts. It would also expand 529 accounts that are traditionally used to save for college to also cover paying apprenticeship fees, home-school expenses and student debt. Another savings proposal would allow families to use money from their retirement accounts penalty-free after the birth or adoption of a child.

The third component is designed to encourage new business investment, such as by allowing new businesses to write off more of their start-up costs.

The outline of the tax package comes the week before the House breaks for its August recess. House GOP leadership has been urging members of the caucus to talk about the tax law and other accomplishments over the break, as part of their “Better Off Now” messaging campaign.

And an expected House vote this fall would come only weeks before the midterm elections, when Democrats are hoping to win control of the chamber.

“This gives House Republicans a really positive platform to hang their hat on right before the November elections and gives them forward momentum,” said GOP strategist Ron Bonjean.

GOP lawmakers at Tuesday’s meeting said that the tax package could be helpful politically as well as from a policy standpoint.

Rep. Mike Bishop (R-Mich.), a member of the Ways and Means Committee whose reelection race is considered a toss-up by the nonpartisan Cook Political Report, argued that the 2017 tax law has been helpful for the economy.

“This is positive and I think very good for my district,” he said.

Democrats are largely expected to oppose a permanent extension of the individual cuts, arguing that it will provide more tax cuts to the wealthy and increase the deficit.

The top Democrat on the Ways and Means Committee, Richard Neal (Mass.), said he’d look at the final versions of the retirement and business innovation pieces but blasted the permanent individual tax cuts piece as fiscally irresponsible.

“It’s going to be brought to floor more as a statement about [Republicans’] prospects in November than it is about sound policy,” he said.

Brady said that making the individual cuts permanent could cost in the ballpark of $600 billion over a decade, but that doing so would benefit the economy, which would offset some of the costs. He cited an estimate from the right-leaning Tax Foundation that doing so would create 1.5 million jobs.

A second package of tax cuts has been of interest for the White House, with Trump meeting last week with Brady and several members of the House Ways and Means Committee who are running for higher office or in competitive races in 2018.

But while Senate Republicans have a desire to permanently extend the individual tax cuts, it’s not certain that they’ll join the House this year in voting on any of the bills Brady outlined.

“I would be surprised if any of these see the Senate floor before the midterm elections or before the lame-duck [session],” said Rohit Kumar, a former aide to Senate Majority Leader Mitch McConnell (R-Ky.) who now works at PwC.

Kumar said that the proposal to increase savings incentives might have a shot at passage in the Senate, but the proposal to make the individual tax cuts permanent would not.

Congress hasn’t adopted a budget resolution that would allow them to use reconciliation to pass a tax cuts 2.0 package. As a result, a bill on permanent individual tax cuts would need 60 votes to pass the Senate, and Republicans only hold 51 seats. Republicans would be unlikely to get the support of nine Senate Democrats, who all opposed last year’s tax bill.

However, a few Democratic senators who are vulnerable in the midterms could vote in favor of the legislation, which would make it harder for their Republican challengers to attack them over their votes against the 2017 law.

“Part of the consideration is, does this become a free political vote for vulnerable Democrats,” Kumar said.

Meanwhile, Senate Republicans aren’t all on board with a second round of tax cuts. Deficit hawks such as Sens. Bob Corker (R-Tenn.) and Jeff Flake (R-Ariz.) have said they wouldn’t vote for a bill of tax cuts that aren’t offset.

The Senate also has other priorities they are likely to focus on in the fall — in particular, confirmation of Trump’s Supreme Court nominee, Brett Kavanaugh.

Senate Majority Whip John Cornyn (R-Texas) said “we’re kind of stacked up” but that perhaps there would be a way forward because there’s some bipartisan support for extending the cuts for individuals.

Brady had told reporters on Monday that he would be outlining the path he plans to take on fixes to the 2017 tax law on Tuesday. But the document that the Ways and Means Committee released did not mention technical corrections.

Brady said that legislation making fixes to the tax law would move separately from the tax cuts 2.0 package and that the House may take up a corrections bill in November or later. He said that lawmakers are waiting to see what aspects of the tax law the Treasury can clarify through guidance.

“A lot depends on what Treasury can clarify,” he said.

Updated at 4:58 p.m.