Crossing Trump’s Red Line on Taxes

By Yuval Rosenberg and Michael Rainey Will Congress Cross Trump’s Red Line on Corporate Tax Rates? President Trump has said that cutting the corporate tax rate to 20 percent is “very much a red line,” and Treasury Secretary Steven Mnuchin last week said the administration was set on that number: "It’s not going up. I can tell you this is one of the things the president feels very strongly about." But the enormous loss in revenue created by the GOP tax cuts — the Committee for a Responsible Federal Budget puts the cost as high as [$2.2 trillion]( over 10 years — may [force Congress]( to consider a slightly higher rate in the end. Political calculations are a factor as well, with some lawmakers worried about the popularity of a bill that provides big cuts for corporations while raising taxes on some lower- and middle-class households. Sen. Susan Collins, a key Republican vote, echoed those concerns this past weekend, telling ABC’s George Stephanopoulos that [she thinks]( “the reduction in the business tax rate is too steep, and that we could go to 22 percent, and then use that money, which is about $200 billion, to restore the tax deduction for state and local property taxes. That would really help middle income taxpayers.” Martin Sullivan, chief economist at Tax Analysts, [said]( Tuesday that a higher rate looks likely: “It seems inevitable--both for obtaining passage of their tax cut and for success at the polls in 2018--Republicans must provide more relief for the middle class and small business. The glaringly obvious way to pay for this is to hike the proposed 20% corporate rate to 22.5 or 25%.” Given the fiscal and political constraints, a corporate tax rate higher than the proposed 20 percent seems like a logical compromise. But that still doesn’t mean it will happen. Asked earlier this month about a possible 22 percent top rate for businesses, Gary Cohn, the president’s top economic advisor, [told]( Fox Business, “President Trump’s not going to agree to that.” [Share]( [Tweet]( [Forward]( Quote of the Day via [Bloomberg]( 3 Thorny Issues That Could Lead to a Government Shutdown in December The threat of a government shutdown in December is getting real. Funding for the government runs out on December 8, but with Congress focused on the tax bill that President Trump wants delivered by Christmas, it’s unlikely that lawmakers will be able to agree on a budget for 2018 before the deadline. The likely outcome is another short-term continuing resolution in early December that funds the government until the holidays – and that’s when things could get interesting. Here are three issues that could result in another shutdown: 1. A DACA fix. The Deferred Action for Childhood Arrivals program will expire in March under an executive order from President Trump. Democrats want to restore the program’s protections for hundreds of thousands of people brought to the U.S. illegally as children, and they appear willing to use DACA as leverage in budget negotiations, with many threatening to [withhold their votes]( for a spending bill if the immigration issue isn’t addressed in December. But party leaders reportedly are also worried about being blamed for a shutdown. Many Republicans want to handle immigration issues in a separate bill, with some looking to push the issue into 2018. “Privately, both sides are worried — fearful of either enraging the party’s base or getting punished at the polls for a government shutdown,” Politico [reports](. 2. Spending levels. Republicans have called for defense spending for 2018 that is [$77 billion]( over the budget cap for 2018, but they need Democrats to agree. Democrats, however, want to see domestic spending increase by an equal amount, an option that is anathema to many conservative lawmakers. Failure to make a deal on raising the caps could bring us to a shutdown by the end of December as the continuing resolution expires and both sides dig in their heels. 3. A Trump tax mess. What happens if Republicans can’t pass a tax bill by the end of the year? Budget expert Stan Collender [says]( it’s “easy to imagine Congress unable to pass a tax bill and President Trump trying to put additional pressure on representatives and senators by vetoing a short-term CR or full-year appropriations.” That’s the worst-case scenario — a president desperate for a legislative win using the threat of a government shutdown to pressure Congress on tax cuts. The end result could be a shuttered government. [Share]( [Tweet]( [Forward]( Fiscal Flashes A ‘Gut-Check Moment’: Mick Mulvaney admitted Sunday on NBC’s [Meet the Press]( that elements of the GOP tax plan were set to expire more “to shoehorn the bill into the rules than because we think it's good policy.” But, The Washington Post’s Editorial Board [writes]( “those rules exist for a reason — to prevent senators from busting the federal budget.” Now that Mulvaney has confirmed the charade, GOP senators must get real about the costs of their tax bill and denounce it: “This is a gut-check moment for any senator who has ever claimed to care about the debt. The Senate is on the verge of further burdening future generations that already face a big bill from decades of budgetary recklessness.” Should Failing Private Pension Funds Get a Federal Bailout? Marc Joffe writes: “Senator Sherrod Brown (D-OH) and Representative Richard Neal (D-MA) introduced [legislation]( last week that would create a new Pension Rehabilitation Administration within the Treasury Department.” The bill would allow plans to borrow from the Treasury at low interest rates for 30 years, with a goal of preventing further cuts to some troubled private sector pension funds. It also gives Democrats a tool to attract working-class voters in swing states. But Joffe says there’s a problem: “Bailing out pension funds by offering them unpayable loans simply kicks the can down the road and increases future deficits in a non-transparent manner. Worse, this approach could easily spread to public sector retirement plans.” Read Joffe’s suggestions for [a better approach](. Send Us Your Feedback: Are you ready for Thanksgiving weekend? Email us your thoughts on tax reform, a possible government shutdown or your favorite holiday dish. We're partial to sweet potatoes, pecan pie and [caramelized brussels sprouts]( roasted with pancetta. Send your favorites to Yuval Rosenberg at yrosenberg@thefiscaltimes.com and follow me on Twitter [@yuvalrosenberg](. Follow The Fiscal Times on Twitter [@TheFiscalTimes](. News - [The White House Wants to Pass Tax Reform. But President Trump Isn't Helping]( – Time - [Democrats See Backlash Over Republicans’ Tax Bill as a Key to Winning in the Suburbs]( – Washington Post - [House Tax Bill Is Littered With Loopholes for Wall Street’s Wealthiest]( – Bloomberg - [Fight Erupts Over Tax Credit for 'Orphan' Disease Drugs]( – The Hill - [Wall Street to Washington: Tax Cuts Are 'Sugar High' That Don't Promote Long-Term Growth]( – Washington Post - [White House: True Cost of Opioid Epidemic Tops $500 Billion]( – Associated Press - [FCC Announces Vote to Destroy Net Neutrality Next Month]( – The Verge Views - [Republican Tax Cuts Will Hurt Americans. And Democrats Will Pay the Price]( – Bruce Bartlett, The Guardian - [How Much Economic Growth Can Tax Reform Deliver?]( – Alan D. Vilard, AEI - [C.E.O. Deficit Fears Dissolve With the Prospect of Corporate Tax Cuts]( – Andrew Ross Sorkin, New York Times - [The Senate Should Not Vote on Tax Reform Without a Dynamic Score]( – Committee for a Responsible Federal Budget - [Don't Be Fooled: Republicans Aren't Simplifying the Tax Code]( – Paul Waldman, The Week - [The GOP Tax Bill Is Good, but Congress Can Make It Better]( – Kudlow, Laffer and Moore, The Hill - [Senator Collins’s Puzzling Tax Demands]( – Veronique de Rugy, National Review - [The Simple Truth About America's Awful Tax Code I Learned as a Fortune 500 CEO]( – Sen. David Perdue, NBC Think Copyright © 2017 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com. Our mailing address is: The Fiscal Times 712 Fifth AvenueNew York, NY 10019 [Add us to your address book](//thefiscaltimes.us1.list-manage.com/vcard?u=40d2c5373681f5cd830b6d823&id=714147a9cf) If someone has forwarded this email to you, consider signing up for The Fiscal Times emails on our [website](. Want to change how you receive these emails? You can [update your preferences]( or [unsubscribe from this list](