The Countdown to a Tax Plan Is Officially On: 6 Things You Need to Know

The Countdown to a Tax Plan Is Officially On: 6 Things You Need to Know

iStockphoto/The Fiscal Times

The House on Thursday narrowly passed the Senate’s 2018 budget, clearing the path for a Republican tax plan expected to be unveiled next Wednesday. The House vote enables Republicans to pass a tax overhaul without Democratic support, and it allows for tax cuts that would raise deficits by as much as $1.5 trillion over 10 years. Here’s what else you need to know:

The budget vote was close: It was adopted by a margin of 216 to 212, as 20 Republicans joined all Democrats in voting against it — an indication of just how challenging it might be for Republicans to pass the most sweeping tax overhaul in decades. “Bear in mind that's 20 no votes on GOP budget before leadership actually releases a bill with a bunch of unpopular but necessary tradeoffs,” NBC’s Benjy Sarlin tweeted.

The House schedule is set: Congressional tax writers have reportedly been working on the closely guarded legislation for months, but the formal process will start now. Ways and Means Committee Chairman Kevin Brady (R-TX) said in a statement Thursday that he will introduce a tax bill on November 1 and schedule a committee markup for members to propose and vote on amendments five days later.

The deduction for state and local taxes is still a major point of contention: Eleven of the Republicans voting against the budget represent New York and New Jersey, high-tax states where residents would likely be hurt by the proposed elimination of the tax write-off. Taxpayers in California, Illinois and Pennsylvania, among other places, would also face a hit. Republicans have been discussing compromises that would preserve the deduction for at least some taxpayers, but they have not yet been able to agree on a deal. “This is a big issue, and it has to be resolved,” Rep. Tom MacArthur of New Jersey said before the vote. “Tax reform is good for the country; it’s just not good for the country when it’s on the back of six states.”

There are plenty of other potential pitfalls, too: Politico’s Brian Faler lays out five other potential sticking points, including changes being considered to the tax treatment of 401(k) accounts and the unpredictability of independent-minded senators — and, of course, President Trump himself.

The GOP’s schedule is ambitious: House Speaker Paul Ryan has said he wants the tax bill to get through the House by Thanksgiving and Republicans hope to have the legislation on the president’s desk by Christmas. But Ryan himself warned yesterday that the hardest part of the process will come once the details of the plan are out and interest groups push back harder on changes they dislike. At the same time, Congress has a calendar full of other contentious legislation it must address in the coming months, including a spending bill to keep the government funded past December 8.

Deficits are heading higher: The budget is non-binding, and federal spending will be determined by separate appropriations bills, but the tax framework being considered would cost the Treasury more than $2 trillion over 10 years, according to analysts. “Make no mistake – this is a defining moment for the Republican party,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a statement released after the budget vote. “After years of passing balanced budgets and calling for fiscal responsibility, the GOP is now on the record as supporting trillions in new debt for the sake of tax cuts over tax reform and failing to act on the pressing need to reform our largest entitlement programs.” Some Republicans say they’re only tossing aside their long-professed deficit and spending concerns temporarily and will address them next year, once tax reform is done.