WASHINGTON (AP) — President Donald Trump promised tax cuts Friday "which will be the biggest in the history of our country" following Senate passage of a $4 trillion budget that lays the groundwork for Republicans' promised tax legislation.
Republicans hope to push the first tax overhaul in three decades through Congress by year's end, an ambitious goal that would fulfill multiple campaign promises but could run aground over any number of disputes. Failure could cost the GOP dearly in next year's midterm elections.
The budget plan, which passed on a near party-line vote late Thursday, includes rules that will allow Republicans to get tax legislation through the Senate without Democratic votes and without fear of a Democratic filibuster. Nonetheless, the GOP's narrow 52-48 majority in the Senate will be difficult for leadership to navigate, as illustrated by the Republicans' multiple failures to pass legislation repealing and replacing "Obamacare."
The final vote on the budget was 51-49 with deficit hawk Sen. Rand Paul of Kentucky the lone opposing GOP vote.
Trump insisted over Twitter on Friday that Paul would be with him in the end on taxes, even though the senator has been critical of the tax package as it's emerged thus far.
Trump wrote, "The Budget passed late last night, 51 to 49. We got ZERO Democrat votes with only Rand Paul (he will vote for Tax Cuts) voting against........This now allows for the passage of large scale Tax Cuts (and Reform), which will be the biggest in the history of our country!"
It remains to be seen whether the overhaul will add up to the biggest tax cuts ever. Trump and Republicans have only produced a nine-page framework, leaving plenty of blanks that Congress needs to fill in over the coming months on income-tax brackets and elimination of some favored deductions.
House Speaker Paul Ryan, R-Wis., said Friday the GOP will add a fourth tax bracket for high-income people to the three originally proposed, but Ryan didn't say what the tax rate would be for that bracket. Speaking on "CBS This Morning," Ryan said Republicans are working on the tax rate for "the fourth bracket that the president and others are talking about that we're going to do."
The House has passed a different budget, but House Republicans signaled they would simply accept the Senate plan to avoid any potential of delaying the tax measure.
"I look forward to swift passage and to working with the president on tax reform," House Budget Committee Chairman Diane Black, R-Tenn., said Friday.
Republicans are looking for accomplishments following an embarrassing drought of legislative achievements despite controlling both chambers of Congress and the White House. Republican lawmakers publicly admit that failure on taxes would be politically devastating with control of the House and Senate at stake in next year's midterm elections.
"It would be a complete disaster," Sen. Lindsey Graham, R-S.C., said after the final budget vote.
But Republicans are split on taxes. A restive rump of House Republicans from high-tax states like New York, New Jersey, Illinois and California staunchly oppose the tax plan's proposed elimination of the federal deduction for state and local taxes. They maintain it would hurt low- to mid-income taxpayers and subject them to being taxed twice.
Their vocal opposition has led Republican leaders in Congress like Ryan and Rep. Kevin Brady, R-Texas, who heads the tax-writing Ways and Means Committee, to hear out the fractious GOP members and seek a compromise with them.
At the same time, the White House is making overtures to conservative Democrats in the House and Democratic senators from states that Trump won in the 2016 election. Most heavily courted have been Sens. Claire McCaskill of Missouri, Joe Manchin of West Virginia and Heidi Heitkamp of North Dakota. The trio dined this week at the home of daughter Ivanka Trump and her husband, Jared Kushner, both top advisers to Trump.
But Manchin said after Thursday's vote, "I fear that passage of this budget today will make it difficult to pass bipartisan tax reform in the coming weeks." In his conversations with Trump, Manchin said, "we have discussed our shared goal of ensuring any tax-reform package passes with both Republican and Democratic votes, and focuses on providing tax relief for working Americans. The current tax-reform proposal ... does not reflect my conversations with the president."
The Democrats were excluded from the drafting of the tax blueprint, and they continue to demand that any tax-cutting plan not add to the mounting $20 trillion national debt. The newly adopted Senate budget plan provides for $1.5 trillion over 10 years in debt-financed tax cuts, busting earlier Republican pledges of strict fiscal discipline.
The government said Friday the budget deficit rose to $666 billion in the just-completed fiscal year.
The money would be used for the tax plan's cut in the corporate tax rate from 36 percent to 20 percent, reduced taxes for most individuals, and the repeal of inheritance taxes on multimillion-dollar estates. The standard deduction would be doubled, to $12,000 for individuals and $24,000 for families, the number of tax brackets would shrink from seven, and the child tax credit would be increased.
Trump and the Republicans pitch the plan as a boon to the middle class and a spark to economic growth and jobs. Democrats charge it mainly would benefit wealthy individuals — like Trump — and big corporations.
Q&A on the GOP effort to overhaul the nation's tax system
By MARCY GORDON, AP Business Writer
WASHINGTON (AP) — Divided Republicans in Congress are tackling an ambitious overhaul of the nation's tax system that would deeply cut levies for corporations and double the standard deduction used by most average Americans.
Despite controlling Congress and the White House, Republicans failed to carry out their years-long promise to dismantle and replace former President Barack Obama's health care law. They say the nearly $6 trillion tax plan, to bring the first major revamp in three decades, is their once-in-a-generation opportunity. President Donald Trump sets it as his highest legislative priority.
But can they deliver? What are the next steps for Congress? How would the changes affect the average taxpayer? Some questions and answers:
WHAT DOES THE TAX PLAN DO? WHY IS IT IMPORTANT?
Trump and Republican leaders unveiled the proposal last month, pitching it as a boon to the middle class and a needed spark to economic growth and job creation. It's only an outline, with Congress left to put meat on the bones as lawmakers turn it into complex legislation.
The plan calls for reduced taxes for most individuals, slashing the corporate tax rate from 36 percent to 20 percent, and doubling the standard deduction used by most average Americans to $12,000 for individuals and $24,000 for families. The number of tax brackets would shrink from seven to three, with tax rates of 12 percent, 25 percent and 25 percent. (Now make that four, with an added bracket for high-income earners, rate to be determined, House Speaker Paul Ryan said Friday.) Inheritance taxes on multimillion-dollar estates would be repealed.
It would bring far-reaching changes for businesses large and small, with fallout too for American companies beyond U.S. borders. The American middle-class family could take advantage of a heftier child tax credit and the extra money that could come from the bigger standard deduction.
But there are too many holes in the spare nine-page plan, like the income levels that would fit with each tax bracket and what might happen to other deductions used by middle-class people, to know how it actually would affect individual taxpayers and families. Other looming unknowns are how it would be paid for and how much it might add to the mounting $20 trillion national debt.
HOW DO THE PLAN'S BACKERS AND OTHERS SAY IT WOULD AFFECT AVERAGE PEOPLE?
Trump is promising that the tax cuts — "which will be the biggest in the history of our country!" — would bring a $4,000 pay raise annually for the average family.
That might sound like the pledge of "a chicken in every pot" that's been attributed to President Herbert Hoover in the 1920s. But Trump's $4,000 claim is based on fuzzy math, in the view of skeptical tax experts and Democratic lawmakers.
Rather than helping the middle class, Democrats charge, the plan mainly would benefit wealthy individuals — like Trump — and big corporations.
The partisan debate over the plan is all about who's got the middle class's back. You'll be hearing those two words a lot out of Washington in coming weeks.
WHAT HAPPENS NEXT?
Now that Senate Republicans have muscled through a $4 trillion budget plan, and the House is poised to adopt it, the ground has been laid for serious work to begin on filling in the details and whipping up complex tax legislation. The budget plan provides for $1.5 trillion over 10 years in debt-financed tax cuts, busting earlier GOP pledges of strict fiscal discipline. More bad news on the federal budget deficit came Friday, when the government reported it rose to $666 billion in the just-completed fiscal year, an $80 billion increase.
But the work won't be quick. Strap in for a long slog in separate House and Senate committee hearings, drafting meetings and closed-door negotiations. And a feast for lobbyists descending on lawmakers, especially members of the two tax-writing committees. The swarm depicted in "Showdown at Gucci Gulch," the book chronicling lobbying in the landmark 1986 tax overhaul under President Ronald Reagan, is about to get its second act.
The Republicans are promising to get a final bill to Trump's desk by Christmas — already slippage from the earlier Thanksgiving deadline. The House version of the legislation is expected to come forward by early next month. The Senate has its own ideas and may well craft its own bill, which means the differences would have to be hammered out in a potentially contentious joint conference.
THAT SOUNDS HARD. AND THE REPUBLICANS THEMSELVES ARE DIVIDED?
Complicating the picture further, the tax plan already has driven a sharp wedge through House Republicans, cracking open regional fault lines within the majority party. The plan would eliminate the federal deduction for state and local taxes, a widely popular break used by some 44 million Americans, especially in high-tax, Democratic-leaning states like New York, New Jersey and California.
Republican lawmakers from those states have revolted, balking at supporting the tax plan when their votes are so critically needed. Their opposition has led the GOP leaders in Congress to hear out the fractious GOP members and seek a compromise with them. At the same time, the White House has made overtures on the tax plan to conservative Democrats in the House and Democratic senators from states that Trump won in the 2016 election.