Trump defies GOP over tax cuts for the rich
President Donald Trump — eager to work with Democrats on tax reform — upended Republican leaders' plans to cut taxes for the rich just as the party is set to unveil its much-awaited tax proposal.
During a meeting at the White House on Tuesday, Trump made a point of telling GOP and Democratic lawmakers that his top tax advisers — Gary Cohn and Treasury Secretary Steven Mnuchin, both very affluent individuals — won’t see their tax bills reduced. Both men nodded in agreement, sources in the room told POLITICO.
Though Trump has insisted before that the wealthiest taxpayers wouldn’t benefit from his plan, the timing of the assertion roiled what Republicans were hoping would be a unified tax reform rollout on Wednesday. Instead of lowering the top income bracket to 35 percent, as congressional leaders wanted, multiple GOP sources say they will now say that the top rate is open to negotiation — and that a tax surcharge could be imposed on the most affluent.
“What we heard is that things were negotiable,” said Rep. John Larson (D-Conn.), a Ways and Means Committee member who attended the meeting. “But [Trump] couldn’t have been more clear about it being a middle-class, working-class, lower-class tax cut.”
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The last-minute scramble on perhaps the most politically sensitive piece of tax reform came a day before Speaker Paul Ryan and Vice President Mike Pence were set to rally the House GOP Conference around a newly minted GOP tax proposal. It highlights the fickle nature of the tax talks: Republican leaders had been working on a partisan tax bill, but Trump wants to work with Democrats, too. And seared by the failed effort to push a partisan health care bill through Congress, top White House officials are wary a GOP-only tax bill will fail, too.
While Trump told House Ways and Means Committee members that the top rate is “negotiable,” his message contradicts the very blueprint being sketched out by the so-called Big Six. The group writing the GOP tax bill — which includes Cohn, Mnuchin, Ryan, Senate Majority Leader Mitch McConnell and the tax committee chairmen in both chambers — had intended to reduce the top rate of 39.6 percent rate to 35 percent, according to multiple Hill and administration sources.
Not every Republican on the Hill is balking at Trump’s message, though conservatives have long called for rate reductions for everyone, including the upper class. In fact, there's now quiet talk among GOP Ways and Means members that they could leave the 39.6 percent rate for top earners in a fourth bracket, even as top tax writers were hoping to condense the seven tax brackets to three. Lawmakers could set a lower rate on business investments because that's money they're plowing into the economy, not just sitting on it, they say.
“I, too, share concerns about a tax reform that is going to target the wealthy individuals,” said New York Republican Rep. Tom Reed, another tax panel member who attended the meeting. “My priority are the Americans working paycheck to paycheck, middle-class folks who need relief from the broken tax code.”
Rep. Mike Kelly (R-Pa.), an early Trump supporter and top congressional ally, said Trump clearly wants to work with both sides of the aisle: “I think the real call is from the White House about how things become integrated and how much it becomes bipartisan, and I think the president, the way he spoke today, he’s looking to make sure bipartisan elements are there."
Democrats are skeptical. Larson noted that “there wasn’t a person in the room he didn’t agree with,” calling Trump a “good salesman.” Others say they’ve heard Trump talk out of both sides of his mouth plenty of times before. Trump seemed undecided on the top rate Tuesday, while also pledging to eliminate the estate tax, which would disproportionately benefit the wealthy.
"Trust everyone, but cut the cards. ... I say that as it relates to taxes,” Larson said. “The devil is in the details ... so, we’ll see.”
Democrats also note that congressional leaders haven't taken the same tack as the leader of their party — excluding Democrats from tax talks nearly altogether. In a letter to Ryan on Tuesday night, just hours after meeting with the White House, House Democratic Caucus Chairman Joe Crowley (D-N.Y.) asked the speaker to allow Democrats to attend Wednesday's tax retreat.
"I am deeply concerned by Republicans’ go-it-alone approach to tax reform, which is occurring despite eagerness from House Democrats to engage in the process," he wrote. "I respectfully ask you expand this [retreat] to include House Democrats."
That doesn’t mean Trump won’t try to win them over. It’s why he hosted Republicans and Democrats from the tax panel at the White House just two weeks after huddling with the bipartisan Problem Solvers Caucus.
Ways and Means ranking Democrat Richard Neal kicked off the meeting by making the case that tax reform should benefit not the rich, but the middle class. Trump agreed, saying he’s “prepared to negotiate with Democrats" on rates and vowing the GOP bill “would not be helpful to the wealthy,” Neal said.
The president didn't discuss specifics of the tax reform outline he's scheduled to discuss Wednesday in Indiana, the Massachusetts Democrat continued. He did say in public remarks before the meeting that the plan would include "nearly doubling the standard deduction that most families take on their taxes, and increasing the child tax credit."
GOP insiders say the administration — and Trump in particular — are sensitive to accusations that their plan would benefit top earners. That’s not only because Trump’s populist base is mostly middle-class earners but also because he and his Cabinet members are incredibly wealthy — and they don’t want to be seen as throwing kickbacks to one another.
In fact, at one point during the tax meeting, Trump pointed to Mnuchin and Cohn and said they won’t get a cut. The two nodded their heads, according to Larson, and said on cue: “We’re not getting any tax breaks.”
Rep. Linda Sánchez (D-Calif.) soon after gave an impassioned speech about working mothers and the need for child care assistance in the tax code. Trump became excited, exclaiming something along the lines of: “I’ve got to get you to talk to Ivanka because that’s all she talks to me about,” according to one member in the room.
Kelly said Trump told Sánchez: “‘Linda, you are going to be really, really happy tomorrow when we bring this up. You’re going to be so surprised that nobody’s going to be able to say anything bad about it.”
Asked about the exchange post-meeting, Sánchez gave an eye roll. After Trump “assured me that I would love their proposal on child care and that tomorrow I would be thanking him,” she said she retorted: “Can I get that in writing? Because I’m a lawyer.”
“He said, ‘Oh, my daughter talks about that all the time.’ And I said, ‘Well, I’d love to talk to her about it because I’ve been working on that for several years,’” Sánchez mimicked. “We’ll see if they’re sincere in wanting to work on that but he guaranteed me that I would love it. I would love it.”
Sánchez also said Trump told the room the tax rate for multinationals to bring earnings back to the U.S would be 10 percent: “Apparently, he picked the rate himself. Other people wanted lower, and he thought 10 was a nice, round number, apparently.”
Republicans aren’t sure what to make of Trump’s comments about bipartisan tax reform. Many are privately skeptical that he can cut a deal with Democrats on taxes.
Overtures aside on the top individual tax rate and child tax credit, Ways and Means Democrats are also approaching the potential opportunity with a dose of skepticism.
“There are a ton of unanswered questions because they didn’t release any of the details of what tax reform would look like,” said Rep. Ron Kind (D-Wis.), who added that Trump’s invite the day before he was scheduled to release the updated tax reform plan was a bit late for his taste. “It’s nice to be there on the takeoff and not just the landing.”
Kind also questioned the partisan path Republicans have taken on taxes to date, and still plan to, by using the budget reconciliation process to secure passage with a simple Senate majority. That would block Democrats from filibustering the bill.
“This may have been a carefully choreographed show,” said Rep. Brian Higgins (D-N.Y.), who added that he’s nonetheless hopeful for a bipartisan opportunity on taxes.
Heather Caygle contributed to this report.