Blue Dogs oppose GOP tax package

A bloc of fiscally conservative Democrats will announce their opposition to the Republicans’ far-reaching effort to overhaul the tax code on Wednesday.

The business-friendly Blue Dog Coalition had represented the best chance for the Republicans to win at least a modicum of Democratic support for their sweeping tax-reform package, which GOP leaders, scrambling to secure a major legislative victory this year, are racing to enact before Christmas.

But Blue Dog leaders, after mulling the package passed by the House Ways and Means Committee last Thursday, say the Republicans’ proposal breaks all the group’s guidelines for a tax code redesign. It fails to simplify the tax code, they contend, while busting the budget, neglecting new infrastructure investments and threatening too many middle-class families with a tax increase.

“We simply cannot support a bill that, by every kind of measurement, has been determined to add over $2 trillion to the deficit at the expense of middle-class Americans,” the Blue Dog co-chairmen, Reps. Jim Costa (D-Calif.), Henry Cuellar (D-Texas) and Daniel Lipinski (D-Ill.), said in a statement obtained by The Hill.

“It’s a fact that some middle-class Americans will see their taxes go up and small business owners will face a more complex tax system under this bill,” they added. “We are not convinced that the middle class gets a fair shake when it comes to the deductions that have been eliminated, where the tax brackets are set, and whether and where jobs will be created.”

The 18-member Blue Dog Coalition, while critical of the Republicans’ opening proposal, had initially left open the possibility that they’d jump on board if GOP leaders reached across the aisle and made some changes. The group’s opposition — aligning them squarely with House Minority Leader Nancy Pelosi (D-Calif.) and the wave of more liberal Democrats hammering the bill — all but ensures the Republicans will be on their own when GOP leaders bring the package to a floor vote Thursday.

The Democrats’ blanket opposition will likely be inconsequential in the near term. Republicans of all stripes are lining up behind the tax package, and Republican leaders, who have struggled on numerous occasions to secure 218 votes on fiscal bills, are confident the legislation will sail through the House this week.

The Senate proposal, however, strays from the House version on several major points, leaving no guarantees that GOP leaders can reconcile the differences and pass a compromise through both chambers with only Republican votes.

Both bills feature a sharp cut in the corporate rate, a reduction in the number of tax brackets, a doubling of the standardized deduction and the elimination of numerous special-interest deductions. And both allow for $1.5 trillion to be added to the debt over the next decade.

But the Senate’s latest version, released late Tuesday by Finance Committee Chairman Orrin Hatch (R-Utah), also includes a repeal of ObamaCare’s individual insurance mandate — a provision favored by conservatives and President Trump but one that will likely erode GOP support from moderates, particularly in the House.

The Senate proposal also does away with the state and local tax deduction, known as SALT, for both income and property taxes, which is sure to alienate House Republicans from states like New York, New Jersey and California. (The House bill would repeal the SALT income-tax deduction, but catering to lawmakers in those high-tax regions, it partially retains the property tax deduction, up to $10,000.)

Republican leaders have touted the changes as a boon to taxpayers of all income levels, generating economic growth and creating jobs along the way.

“We believe everybody will benefit,” Speaker Paul Ryan (R-Wis.) said Tuesday night during a town hall meeting hosted by Fox News.

Yet numerous analysts predict that millions of middle-income families would face higher tax burdens, particularly five and 10 years down the line, when some of the benefits expire.

The combination of concerns — and the short timeline the Republicans have left themselves to move the package — creates plenty of pitfalls ahead of their Christmas deadline.

The Blue Dogs, for their part, see an opportunity in the Republicans’ challenges, arguing that major tax reforms are all but impossible without bipartisan support.

“Our tax reform principles were an exit ramp for congressional Republicans to move away from the partisan path they’ve been attempting to take — and it will continue to be an option as they confront the fact that partisan solutions simply don’t work,” Costa, Cuellar and Lipinski wrote.

“Our hope is that, when this bill comes back to the House in a different form, our Republican colleagues will include us in a real way.”