Wednesday, October 18, 2017

TAX VOTE IMMINENT | Trump Stumps for Deficit-Financed Cuts

Tax Cuts Financed by Borrowing, for the Wrong Taxpayers, at the Wrong Time?
October 18, 2017 – The following is an up-to-the-minute report on tax legislation from Dana Chasin in Washington, D.C.

It describes President Trump's tactics to promote his deficit-financed tax-cut program, a Keynesian fiscal-recovery strategy at a time of full employment. A Senate vote is imminent.

Chasin's report is titled "Trump Wooing Democrats on Tax; Outside Groups Making Inside Pitches Too. (Update #215.)" Reposted here by permission.

Senate debate continued today on the budget resolution that the GOP now has the votes for, and intends to pass, tomorrow night. The resolution includes reconciliation instructions for a $1.5 trillion deficit-financed tax cut. As we watch the amendment process – a.k.a. "Vote-a-rama" – and await the final vote, we examine a strategic choice Trump has pursued while pitching his plan around the country.

Over the last few months, Trump has targeted specific Democratic Senators from states he won who are in the ballot in 2018, seeking to cajole them to join him on his tax plan. What tactics has he employed?  How have outside groups weighed in? Can these efforts succeed? See below.

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Trump’s Methods

Trump has been holding rallies in states he won that have Democratic Senators regularly over the last six weeks. He started just before Labor Day in Missouri, where he called on voters to “vote out” Senator McCaskill if she does not go along with his tax agenda.

The President appeared with Senator Donnelly at his event in Indiana and used a teasing tone to pressure the Senator. In an even lighter approach, Trump gave Senator Heitkamp a ride on Air Force One and praised her as a good woman who he hoped would support his tax plan. Senators Donnelly, Heitkamp, and Manchin each declined to sign a letter with 45 other Democrats opposing tax cuts for the top 1 percent.

Trump has not yet visited Montana. Sen. Tester extended Trump an invitation to visit his state. Expect Trump’s efforts with Tester to be as soft-peddled as with Sen. Heitkamp

Other Forms of Pressure

Trump is arranging dinners with Democratic Senators to woo them on tax. So far, he has dined at the White House with Sens. Manchin, Heitkamp, and Donnelly. Ivanka, Jared, and the administration's legislative director Marc Short hosted Manchin, Heitkamp, and McCaskill on Monday. Sen. McCaskill aired concerns about pass-through rates and insufficient child tax credits.

Trump enlisted Vice President Pence to push their tax plan in Indiana to help pressure Sen. Donnelly. Pence has also pushed the tax plan in Michigan, implicitly targeting Sen. Stabenow. Vice President Pence found more friendly terrain in West Virginia where Sen. Manchin joined him at a tax event in a state that Trump carried by 41 points.

Trump-allied groups are running ad campaigns against Senators Manchin, Heitkamp, and Tester. The ad shows President Kennedy claiming tax reductions would stimulate growth and boost worker wages. The 30-second ad buy costs six figures and has run on television in three states represented by in-cycle Democratic Senators.

There are three potential objectives in the administration’s barnstorming campaign.

Getting to 50: A small but significant number of GOP senators are raising objections to the tax proposal’s deficit impact. The administration worries about a repeat of the healthcare fiasco when Senate Republicans could not find the votes undo the ACA and hopes to coax one or two centrist Democrats to move Trump’s tax proposal in the event any Republicans break ranks.

Getting to 60?: The administration is concerned Senate Republicans might fail to pass tax reform via reconciliation (either because they cannot pass a budget resolution or because the vote fails on the floor). It may be  keeping open the remote possibility of a permanent comprehensive reform package that could pass through regular order with eight Democratic votes – extremely unlikely, as it would require a thorough rewrite of the current proposal.

Positioning for 2018: Trump might use the tax issue to help Republicans position themselves against Democratic senators in the 2018 midterms. He has targeted Democrats in states he won in 2016, calling on voters to “vote out” senators who oppose his tax plan. Nevertheless, Trump wants a win now to deliver legislation in his first year; Congressional incumbents may benefit more from election year accomplishments.

Trump’s Targets

To push his tax agenda, President Trump has targeted six Democrats with rallies in their states, invitations to the white house, and ad buys. He has taken a different approach to each Senator.

Sen. Joe Donnelly, Indiana – The President chided Donnelly during an Indiana tax rally, making an appearance with the Senator. The two have met over dinner at the White House. Sen. Donnelly is not close to supporting the current framework, as the tax benefits are not sufficiently aimed at the middle class.

Sen. Heitkamp, North Dakota – Trump made a special effort to play nice with Sen. Heitkamp on a trip to Bismarck last month. Not only did he praise her during his tax speech, but he also brought her along from D.C. on Air Force One. Trump-allied groups have invested 30-second ad buys promoting tax cuts on North Dakota TV. Sen. Heitkamp is well liked by the North Dakota business community and has extensive experience in tax policy and administration. She opposes cuts for the top one percent and/or additions to the deficit. Heitkamp has indicated interest in collaboration on tax reform, reaching out after Trump’s visit but the administration has not contacted her or her staff since.

Sen. Joe Manchin, West Virginia – Sen. Manchin dined with the President and attended an event with the Vice President to discuss tax reform. Trump was scheduled to make a trip to West Virginia but had to cancel to travel to Las Vegas in the wake of the shooting. He's unreachable, barring a radical revision. Sen. Manchin would set the corporate rate at 25 percent, the pass-through rate at 30 percent, and would tax money stashed overseas at 10 percent. Like Republican Bob Corker, he would oppose any plan that adds too much to the debt. He seems to have been most effective among Democrats at negotiating details with the administration.

Sen. Claire McCaskill, Missouri – She is the first Senator to be targeted by the President during his August visit to kick off his tax plan road show. The President called her out by name saying that if she doesn’t support his plan Missouri should vote her out. Sen. McCaskill emphasizes simplicity, expanding child tax credits, opposing the pass through rate cut. She stated at a town hall recently that she would love to help the administration on a tax reform package, but the current framework is only a cut for the one percent, not middle class families.

Sen. Debbie Stabenow, Michigan – Vice President Pence stumped for tax reform in Michigan. There have been no reports of President Trump pursuing direct personal outreach. Sen. Stabenow has focused on tax reform as it relates to supporting workers.

Sen. Jon Tester, Montana – The President has not yet visited Montana. This led Tester to invite the President to his state – which does not suggest he is close to supporting the framework. Trump-allied groups invested in 30-second ad buys promoting tax cuts in Montana. Sen. Tester articulated his priorities on tax: simplify it, make sure it doesn’t add to the debt, and give a break to working families and small businesses.

Will It Work?

As hard as Trump works, his efforts are not yet producing results and despite the extent of the investment, return on it looks fanciful. None of his Democratic targets support the present tax framework. Primary reasons are the plan’s inequity, lack of emphasis on the middle class, the deficit impact, and its lack of detail. To date, there are no signs of division within the Senate Democratic caucus on Trump's tax plan and only fitful indication that Trump might revise his plan to such an extent that Democrats might take another look.

None of these Senators is in a position to support Trump on taxes today, despite his cajoling. To attain bipartisanship, Republicans will have to move closer to Manchin’s principles. From any angle, Trump’s barnstorming appears to to be little more than an attempt to create cover in the event of a meltdown in the Senate. As the tax plan stands now, Democrats will be unwilling give him any votes.


See also Update #211 and Update #204 by Dana Chasin, also on tax reforms.
[Also: Politico, "Why Trump Will Regret Passing Tax Reform."]