Norquist: Trump Got a Mulligan — Now He Needs to Act Fast
WHY YOU SHOULD CARE
The country’s leading tax reformer explains how Trump will fulfill his promise to repeal Obamacare and to cut taxes.
The fourth in a series of op-eds by the president of the conservative group Americans for Tax Reform.
He avoided comment on Arnold Schwarzenegger’s poor ratings in The Celebrity Apprentice. There were no pointed attacks on members of the Fourth Estate and no update on just how many Americans attended his inauguration. And friends and foes alike responded by calling the speech “presidential.”
President Donald J. Trump’s hour-plus address to Congress last week delivered a clear agenda for his goals for 2017 and his key priorities. First, aka now, “repeal and replace” the Affordable Care Act. Immediately thereafter, pass tax reform. Third, and later, other stuff. On this and only on this “other stuff,” the president repeatedly reached out to Democrats for their cooperation and even their ideas.
This focus and the advanced timetable suggest that the White House is gaining its sea legs in understanding how Washington works. The top two priorities, Obamacare repeal and tax reform, are pushed to the fore because life is uncertain: Foreign policy and scandals distract, and no one is guaranteed to be in the driver’s seat in Washington beyond the first year of a presidency. Bush 43 lost his Republican Senate majority after just six months; Obama lost his House majority and Senate supermajority after two years.
Both repealing Obamacare and tax reform must be done within the “budget reconciliation” framework, a set of budget rules that allow legislation to pass with 51 votes in the Senate (no possibility of a filibuster) and a simple majority in the House. Not a single Democratic vote is required. Lose the House or Senate in 2018, and the door slams shut on this option and on both Trump priorities — after all, there will be no Democratic votes for radical changes to Obamacare or the federal tax code. As a result, delay on those issues will mean death.
To pass a permanent tax reduction through the budget reconciliation process, the budget changes — spending and taxes — must be budget deficit neutral after year 11. Temporary tax cuts, like Bush’s in 2001 and 2003, and temporary spending hikes can pass with 51 votes. But it takes 60 votes (passing through filibuster) to permanently cut taxes or to permanently increase entitlement spending. That is why Obama needed 60 votes to enact Obamacare — it increased the deficit in years 11 and beyond.
Republicans plan to repeal the tax cuts and most spending in Obamacare first — in order to reduce the revenue baseline in the future. Ending Obamacare is a trillion-dollar tax cut over a decade. Repealing most of the spending is a trillion-dollar spending cut. Revenue neutral. Permanent.
Trump’s speech, and subsequent administration statements, have made it clear the White House and House of Representatives are in sync. They will, one, repeal the 20 tax cuts in Obamacare and repeal most of the spending. Two, they will radically increase the size and scope of health savings accounts. On Medicaid block grants to the states, high-risk pools will be established to subsidize health insurance for those with pre-existing conditions. (Republican governors have been hosting conference calls on this for some time. The level of federal/state cooperation in reforming this entitlement is unprecedented.) And, four, they will create tax credits to extend coverage to Americans without employment-based insurance, Medicaid or Medicare. The goal is to have few if any Americans fall through the cracks.
One cannot change legislative policy inside a budget reconciliation bill, just tax and spending numbers. But Obamacare was written with more than 1,000 different places where the secretary of health and human services “may” or “shall” decide what the law requires. That means many opportunities for waivers, freeing states from federal requirements.
After Obamacare is repealed and health care policy is redirected as far as allowed within reconciliation rules, the tax cut can move forward in its own reconciliation package. It too must be deficit neutral in years 11 and beyond. That is why it’s important to reduce the revenue expectation prior to passing the tax bill. In addition, the House and Senate have agreed that tax cuts can be scored “dynamically,” and that allows revenue flowing from expected economic growth to “pay for” additional tax cuts.
The tax reform outlined by Republicans in the House over the past four years and amended by Trump’s demand to further reduce the corporate rate fits inside the requirement that allow the tax cut/reform to be made permanent. The tax bill will cut the corporate rate from 35 percent to 20 percent, the rate on business income inside Subchapter S corporation to 25 percent, end the “death tax” and the alternative minimum tax and reduce individual rates to 33 percent, 25 percent and 12 percent, while moving to a territorial tax system that allows American firms to repatriate future earnings at a zero percent tax rate.
And what about the “border adjustable” part of the corporate income tax reform that is opposed by many lobbyists in Washington? The timetable Trump laid out and his staff’s comments have made it clear the tax bill is no longer available for significant alterations. Now Trump and the House will move the largely written tax plan through Congress.
The Trump agenda and priorities have been clearly laid out. The popular and business support for both, and the power of the presidency and pull of party loyalty, make it likely that the initiatives will be law before fall 2017.
Then … who knows?
- Grover Norquist, OZY Author Contact Grover Norquist