WASHINGTON (Reuters Breakingviews) - Republicans appear giddy about the prospects of a historic tax overhaul, but like most highs, this one seems unlikely to last. The GOP expects to pass a budget resolution this week that paves the way for a reform bill, which the U.S. House of Representatives aims to approve by Thanksgiving. But they still haven’t solved their deficit dilemma, and President Donald Trump is shooting down potential revenue raisers.
House Speaker Paul Ryan already sounded a bit triumphant on Tuesday when he said Congress was “on the verge of doing something that is going to make a big difference for so many families.” On Thursday, his chamber is expected to approve a Senate budget resolution that would allow tax cuts to add $1.5 trillion to the deficit over 10 years. The House had initially approved a plan that didn’t allow for any such additions.
Independent tax analysts expect the White House-backed reform plan will add $2 trillion to $5 trillion to the deficit over 10 years. But proposals to offset tax cuts are already facing opposition. On Monday, Trump tweeted his rejection to proposals that would cap tax-deferred employee contributions to 401(k) retirement accounts to $2,400 a year. Currently, workers up to 50 years old can contribute up to $18,000 a year. Senate Finance Chair Orrin Hatch said Congress may disagree with the president on some of these issues.
Trump also expressed doubt about a Republican option to add a fourth tax bracket for the top wealthy earners, which could leave them paying as much or more than they do now. At the same time, Republicans are squabbling over a proposal to repeal deductions for state and local taxes, which would raise $1 trillion over a decade.
Resolving the differences was never going to be easy. Trump may have complicated the task on Tuesday when he tweeted fresh insults at Republican Senator Bob Corker, who has been skeptical about the tax effort. The comments came ahead of a lunch between the president and Senate GOP members aimed at shoring up support for tax reform. Their hard work is only just beginning.
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