Trump seeks bipartisan support for tax reform

Last week Treasury Secretary Steve Minuchin announced that the Trump Administration was ready to begin its effort at tax reform, something that has been promised, but not realized, since February.

What is different, he says, is that the White House will not do a hand-over to Congress, as it did with the DACA rescindment, but will, instead be actively involved in the process; some observers, are saying this is a maneuver to position President Trump into a more visible role in legislation -- and hopefully win -  since he has had no legislative victories since taking office.

As is well known, the repeal of the Affordable Care Act was the most prominent loss,  which was preceded by the Muslim Travel Ban, which was largely derailed by the U.S. appeals courts.

In short, Trump needs a win.

While tax reform has bipartisan support, and the recent agreement with Senate Minority leader Chuck Schumer and House Minority leader, Nancy Pelosi, seems to suggest that there just might be an iota of bipartisan work, in this area, there are several key issues, that might just prevent that: Number one on the list is lowering the tax rate for the wealthy, followed by repeal of the estate tax, and last, but not least, the elimination of state and local tax deductions.

Even stickier, is funding tax cuts without swelling the national debt, an effort, that even the more creative economic talents say is the hardest to do. Next up, is lowering the corporate tax rate, one of the bugaboos in the effort and one that led to some notable defections in corporate mergers with foreign companies, and moving headquarters to their side, to avoid the high US rate; this was seen in the headline grabbing proposed merger of Allergan and Pfizer, which failed under the Obama regulations, but could be given new life under Trump.

Of the current U.S. corporate tax rate, Trump thinks that he can change it from the current rate of 35 to 15 percent, while Speaker of the House, Paul Ryan, feels that a figure in the 20s might be more feasible.

All things being equal, there are some realists, such as Rep. Richard Neal, the top Democrat on the powerful House Ways and Means Committee, who remarked, that there is “a certain volatility at the White House, where minds and moods change very swiftly.”

Earlier, this year, in April, in what was widely seen as a public relations move,  Trump unveiled a tax reform plan that said little, promised much, and left nearly everyone wanting more, than was given; and, in fact what was on a single page memo that contained mostly retreads from the campaign.

At its best, it showed that the “so-called” reform highlighted the president’s determination to give tax breaks to the wealthy, while middle-class and working families received nearly zero benefits.

Mnuchin and Gary Cohn, director of the National Economic Council, claimed that the proposal was the “most significant tax reform since 1986” and that it would pay for itself, with a 3 percent increase in the national economy, yet others were not so sure, among them Bernard Baumohl, chief global economist of the Economic Outlook Group, who said, that it was conceptually flawed, and “unlikely to go far in Congress.”

In what many are calling a tailwind decision, last week’s announcement, of the new engagement by the White House, may also partly be in response to an oft repeated observation that the president, is behaving mostly as a bystander, rather than being a participant in crafting legislation.

Cynics also point to the fact that the earlier proposal held the long cherished desire by Trump to eliminate the estate tax, and the alternative minimum tax, known as the AMT (which limits the amount of deductions, and other benefits, available to the wealthy); which in the partial revelation of his 2005 tax return, showed that without it, he would have paid far less in taxes than the $31 million that he did pay.

If all politics are local, then the state tax deductions proposals make people, closer than they appear. No finer example can be the the controversy to remove the deduction of the cost of state and local tax payments, a real benefit for those that live in high tax states, like New York and California; and that also happen to have Democratic majorities.

Crain’s New York Business acknowledged, “that provision especially benefits New Yorkers because city and state tax rates are so high here. It allows the average filer to deduct roughly $20,500 annually from his or her federal taxable income, according to the nonpartisan Tax Policy Center.

The Catch-22 with this, is that it has been estimated that the elimination would increase New York City residents' taxable income by $28 billion, causing their collective federal tax bill to rise by $8 billion a year.”

Further complicating the process is that Mnuchin and Cohn, while acknowledged experts in the field, have gotten into hot water, the former by demanding that, in a meeting with the House GOP lawmakers, that they raise the debt ceiling, as a personal favor to him.

Cohn prominently criticized the Trump’s response “to white supremacist marches in Charlottesville, Va., raising doubts about his clout with the president,” acknowledged The Hill, a prominent inside-the-beltway publication.

Both men have no strong ties to either the Washington power elite, or the conservative majority; but that might also be a political liability, despite their influence and expertise.

Much like the sword of Damocles is the need to salvage the GOP legislative agenda, hanging over their heads.

Tying the hands of the Senate is that with a slim Republican majority, there is a strong need for the support of the Democrats; something that the president jeopardized with his public censure, and call to arms, for Missouri voters, when he recently said that Sen. Claire McCaskill, who had publicly opposed some of his plans, should be voted out of office, if she did not comply.

On Tuesday, the president hosted a dinner party for both GOP and Democratic senators that was labelled “highly prodiuctoive” and a “good first start,” by White House spokesperson, Sarah Huckabee Sanders.

CBS News confirmed that Sen. Joe Donnelly, D-Indiana; Sen. Heidi Heitkamp, D-North Dakota; Sen. Joe Manchin, D-West Virginia; Sen. Orrin Hatch, R-Utah; Sen. Patrick Toomey, R-Pennsylvania; and Sen. John Thune, R-South Dakota, were in attendance.

Performing well for the press seemed to be the order of the day, and “In a statement following the evening's events, Manchin said that he was "glad to join the president tonight to discuss how we can work together in a bipartisan manner on tax reform."

Continuing in this praiseworthy, and collaborative vein, “. . .the Democrat said he continues to fight for a "simpler tax code" for his state's residents, he noted that he was still looking forward to working with Mr. Trump and his Senate colleagues "on both sides of the aisle on tax reform."

Trump, meanwhile, made up for trashing McCaskill, by praising Democratic Sen. Heidi Heitkamp, and on a recent visit to her state of North Dakota called her “a good woman” and invited her to come to the stage.

Working with the other party, was a hallmark of the Clinton administration where after defeats, President Clinton used triangulation, a Washington term for working with the other party, to gain his most notable successes, such as welfare reform. But, for Trump, “If he can’t pass tax reform – a heavy lift under the best of circumstances – by the end of the year, some observers predict electoral trouble for the Republicans in the November 2018 midterms,” said the Christian Science Monitor.

“I think the Republican Party survives if it can prove that it can govern,” says John Feehery, who was the spokesman for former House Speaker Dennis Hastert.

While the Trump team is hoping for a victory, as is the GOP leadership, there are some conservatives who are in doubt. In a recent blog post for The Washington Post, Jennifer Rubin noted: “It’s not at all clear what would be in the tax cuts, for we have yet to see an actual plan, nor is it clear that the GOP will have the benefit of a reconciliation process that requires only 51 votes in the Senate. For that, they’d need a budget resolution to attach the reconciliation instructions and meet the so-called Byrd Rule, which among other things prohibits any increase in the deficit beyond the 10-year window.”

Notwithstanding, the 2600 page tax code is a brute that many have tried to tame, but even in the most recent effort, in 1986, under President Reagan, change was not possible without bipartisan support and what it produced was significant: changes from corporate to individual tax liabilities, and a reduction for some, and for many low income people, no tax liability, at all.

Facing Trump are the challenges of defining what is a “child” for tax purposes; can corporations be taxed on earnings that they make domestically, or can it be extended to overseas; and, what should the corporate tax rate be?

Then there is the president’s long-held opposition to the estate tax that he lugubriously referred to as the “death tax,” which his opponents see as currying to his wealthy friends, and not the average income American. Yet, in a further desire to improve his optics, Marc Short, the presidential liaison to Capitol HIll noted, at a breakfast hosted by The Christian Science Monitor, that “I think that the president first and foremost – rather than party affiliation – looks at what he can do best for the American people and to fulfill the promises he made on the campaign trail.”

If the whole effort fails, then beyond taking small gains, that would be divisive, like reform of the ACA exchanges, “there is the very If Republicans don’t get their save-their-skins-and-the-party tax plan, I suspect you’ll see a bunch more congressional retirements, a whole lot of alt-right challengers and a really angry GOP donor community. At some point they might even begin to ask: What good is Trump if he can’t get us anything we really want?,” notes Rubin.