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Senate Democrats push for revenue neutral tax reform outside reconciliation

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Senate Democrats push for revenue neutral tax reform outside reconciliation Senate Democrats released a public letter last week offering to work with Republicans on tax reform as long as the bill is revenue neutral and does not use the reconciliation process or provide a tax cut for the top 1% of taxpayers.

Senate Majority Leader Mitch McConnell, R-Ky., immediately rejected the idea of moving a bill outside of the reconciliation process, dealing a blow to the idea of bipartisanship. The reconciliation process would allow the Senate to pass a bill with a simple majority vote and without Democratic support.

The letter was only signed by 45 of 48 Senate Democrats. The three who declined to sign, Sens. Heidi Heitkamp D-N.D., Joe Manchin, D-W.Va., and Joe Donnelly, D-Ind., are all up for re-election in 2018 in states won by President Trump. Republicans could seek to work with them on tax reform, though all three held the line with Democrats on every health care vote.

The two other tax reform demands made by Democrats touch on tricky issues for Republicans. Because reconciliation bills generally cannot lose revenue outside the budget window, a tax reform bill may need to be revenue-neutral simply to comply with the rules. The issue of tax cuts for high–income taxpayers is even more sensitive.

Republicans took criticism for the perception that their failed health care reform bills used health care spending cuts to pay for tax cuts for high-income taxpayers, and are taking pains to prevent similar storylines on tax reform. Treasury Secretary Steven Mnuchin has repeatedly said tax reform would not be a boon for high-income taxpayers while Senate Finance Committee Chair Orrin Hatch, R-Utah, recently said “the rich know we’re going to have to come after them.”

Contact Dustin Stamper
Director, Washington National Tax Office
T +1 202 861 4144

Shamik Trivedi
Senior Manager, Washington National Tax Office
T +1 202 521 1511

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