Republicans and the White House announced their tax reform proposal on Sept 27. The reform would create three tax brackets and lower or remove several other taxes, such as corporate income, small business, and estate taxes. A nearly doubled standard deduction would replace most itemized deductions. Trump’s announcement of the Republican-led reform effort was accompanied by House Ways and Means ranking member Sen. Neal’s (D-MA) comments that a bipartisan effort was necessary and that Democrats needed to support the middle class in light of the reform plan’s policies and the President’s promise that the rich will not benefit.
On Sept. 26, President Trump negotiated at the last minute with Democratic leaders to leave the top tax bracket rate negotiable. Despite this cooperation, Democratic leaders were skeptical that their other demands would be met. These conditions included improved child care assistance, which was integrated in the reform plan through an increased Child Tax Credit.
The day after the announcement, Democratic Senators Warren (D-MA) and Schumer (D-NY) criticized the plan as favoring the wealthy and similar to past policies based on trickle down economics. These criticisms drew the President’s ire and prompted him to dismiss the leadership’s goals as unrealistic. This position is in line with a statement last month signed by congressional Democrats which clearly highlighted the policy stance Democrats would advocate on tax reform.
Paul Ryan (R-WI), Mitch McConnell (R-KY), Senate Finance chairman Orrin Hatch (R-UT), and House Ways and Means chairman Kevin Brady (R-TX) have joined Gary Cohn and Steve Mnuchin of the White House to write the bill. Democratic lawmakers are eager to contribute to the reform proposal but have received mixed reactions to their involvement. While some Republicans have expressed a desire to initiate bipartisan collaboration now, leadership has been cold.
Congressional Republicans, including Rep. Andy Barr (R-KY), have expressed concern over some of the reforms, such as removing state and local tax deductions and lowering the corporate interest deduction. Tensions over “pay-for” provisions in the proposal will also prove to be legislative hurdles. Sen. Corker (R-TN) expressed that any significant increase to the deficit would also hurt the measure. As of Oct. 5, the House passed a budget resolution that would aid the reform effort by providing Senate Republicans with a chance to pass reform with a simple majority through reconciliation.
For tribal interests, the plan has kept the Low Income Housing Tax Credit and tax-exempt debt; both are initiatives that encourage tribal economic development. The reform initiative also includes a five-year period allowing write-offs for depreciable assets. There is opportunity for a tribal pension allowance amid the open possibility of repealing the New Market Tax Credit.