Congress could cut taxes for businesses and parents if a handful of Senate Republicans join most Democrats in voting for a bill. In a weird turnabout of the usual priorities, Republicans are suddenly blocking tax cuts that are broadly popular.
Are Republicans suddenly the party of higher taxes? Er, not exactly. But if they play their hand wrong, higher taxes could be the de facto outcome of a ploy that might be just a little too clever.
In January, the House of Representatives passed $78 billion in tax cuts in a surprising act of bipartisanship. Republicans got a trio of business tax cuts meant to juice investment and innovation. Democrats got an expansion of the child tax credit for lower-income families. There was grumbling on each side about the other getting too many freebies, but the bill went to the Senate for what could have been a rare do-something opportunity.
For some Senate Republicans, however, doing nothing now seems better. Bloomberg reports that several Republican senators are indicating they don’t want to vote on the tax cut bill. One opposition leader is Mike Crapo of Idaho, who's influential because he's the top Republican on the Senate Finance Committee. Crapo has reportedly persuaded Minority Leader Mitch McConnell and John Thune of South Dakota, who's vying to replace McConnell as minority leader, to join him in squashing the bill.
Senate Republicans have three main objections. One, they don’t want President Biden to have another legislative success to brag about as he runs for reelection. Two, some Republicans, including Crapo, think an expanded child tax credit would be an expansion of the dreaded “welfare state.” Three, it’s possible Republicans could get more tax cuts, or the tax cuts they want without the child tax credit they hate, if the November elections go their way.
Democrats have a scant two-vote majority in the Senate, which means they need a minimum of nine Republican votes to overcome a filibuster, force a vote, and get the bill passed. So a few things could happen. The bill could just die without a Senate vote, or it could go to a vote and die because it falls short of the threshold for passage. The Senate could also change the bill to address Republican concerns and pass that bill. But then the new version would have to go back to the House, where passage would face a whole new series of barriers.
The bottom line is that this is all probably too much for an election year, which makes it likely Republicans will actually kill a tax cut bill the business lobby says is essential. Will it work? Will Republicans actually get a better deal more to their liking after the 2024 elections?
The first scenario in which they could get a better deal would be if Donald Trump beat Joe Biden in the presidential race, which prediction markets place at about a 45% likelihood. If Trump wins, it’s highly likely Republicans will take control of the Senate and there’s a good chance they’ll keep control of the House as well. The odds of a three-way Republican sweep are perhaps 40%.
If that’s the outcome, the only leverage Democrats would have is the Senate filibuster, assuming they held at least 40 Senate seats. But there are ways around the filibuster Republicans could exploit to pass a large tax or budget bill going far beyond the current bill the Senate is debating and cut taxes even more than the sweeping 2017 tax law did.
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If Biden wins reelection — a 51% likelihood, according to prediction markets — there’s still a good chance Republicans would win the Senate, because Democrats are defending far more competitive seats than Republicans this cycle. There’s about a 40% chance the election outcome is a Biden second term, with one or both chambers of Congress controlled by Republicans.
In that scenario, Republicans could actually have more leverage than they have now. That’s because the 2017 tax cuts for individuals expire at the end of 2025, and there will be overwhelming pressure to continue the tax cuts for lower-income workers. If Republicans hold just one chamber of Congress, that could be enough leverage to demand tax cuts of their choosing in exchange for Biden’s demand to extend tax cuts for ordinary people.
There’s a slim chance Biden could win with Democratic control of Congress, although Republicans would still be able to filibuster in the Senate. Even so, Democrats could then use the filibuster-evasion mechanism to pass at least one large tax bill on a partisan basis without any Republican input.
On the whole, the odds are probably on the side of Republicans who think they can get a better tax deal after the elections than before. But there’s still a chance they won’t be able to pass the business tax cuts teed up before them now.
The Republican strategy is profoundly cynical, needless to say, in that they’re prioritizing what’s good for their party and for their odds of holding power over what might be good for the country. If you don’t already hate Congress, you now have permission to do so.
Democrats play that game too, of course, and the way to turn the Republican gambit back on itself is to convince voters that Republicans are only looking out for themselves at the expense of ordinary people. Democrat Harry Truman famously did that in 1948, when he won reelection against long odds by campaigning against the “Republican do-nothing Congress.”
Biden is already trying to do that by ripping Trump and his fellow Republicans as billionaire sympathizers who want to cut taxes for the rich while slashing benefits for working people. Congress is such a den of dysfunction, however, that sometimes it’s hard to distinguish doing something from doing nothing.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.
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