Congress could cut taxes on businesses and parents if a handful of Republican senators join most Democrats in voting for a bill. In a strange departure from usual priorities, Republicans are suddenly blocking widely popular tax cuts.
Are Republicans Suddenly the Party of Raising Taxes? Um, not exactly. But if they play poorly, a tax hike could be the de facto result of a ploy that may be a little too clever.
In January, the House of Representatives passed $78 billion in tax cuts in a surprising bipartisan move. Republicans secured three corporate tax cuts intended to spur investment and innovation. Democrats secured an expansion of the child tax credit for low-income families. Both sides complained that the other was getting too many gifts, but the bill was sent back to the Senate for what could have been a rare opportunity to do something.
For some Senate Republicans, however, it seems better to do nothing. Bloomberg reports that several Republican senators have indicated they do not want to vote on the tax cut bill. One of the opposition leaders is Mike Crapo of Idaho, who is influential because he is the top Republican on the Senate Finance Committee. Crapo reportedly persuaded Minority Leader Mitch McConnell and John Thune of South Dakota, who is seeking to replace McConnell as minority leader, to join him in defeating the bill.
Senate Republicans have three main objections. First, they don’t want President Biden to be able to boast of another legislative success as he runs for re-election. Second, some Republicans, including Crapo, believe an expanded child tax credit would be an extension of the dreaded “welfare state.” Third, it’s possible that Republicans will get more tax cuts, or the tax cuts they want without the child tax credit they hate, if the November election goes their way.
Democrats have a slim two-vote majority in the Senate, meaning they need a minimum of nine Republican votes to overcome a filibuster, force a vote and pass the bill. So some things could happen. The bill could simply die without a Senate vote, or it could come up for a vote and die because it doesn’t meet the threshold for passage. The Senate could also amend the bill to address Republican concerns and pass this bill. But then the new version would have to return to the House, where its passage would face a whole new set of obstacles.
Ultimately, that’s probably too much for an election year, making it likely that Republicans will reject a tax cut bill that the business lobby considers essential. Will it work? Will Republicans really get a better deal they like after the 2024 elections?
The first scenario in which they could get a better deal would be if Donald Trump beats Joe Biden in the presidential race, which markets estimate at around 45%. If Trump wins, it is highly likely that Republicans will take control of the Senate and also keep control of the House. The chances of a three-way Republican victory are perhaps 40 percent.
If that is the outcome, the only leverage Democrats would have would be the Senate filibuster, assuming they hold at least 40 Senate seats. But there are ways around the filibuster that Republicans could exploit to pass a major tax or budget bill that goes well beyond the current bill being debated by the Senate and cuts taxes even more than made the sweeping tax law of 2017.
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If Biden is re-elected – a 51% probability, according to predictive markets – there is still a good chance that Republicans will win the Senate, as Democrats are defending much more competitive seats than Republicans this cycle. There is about a 40% chance that the election outcome will be a second Biden term, with one or both houses of Congress controlled by Republicans.
In this scenario, Republicans might actually have more leverage than they do now. Indeed, the tax cuts granted to individuals in 2017 expire at the end of 2025, and there will be overwhelming pressure to continue tax cuts for low-income workers. If Republicans only hold one house of Congress, that could provide enough leverage to demand tax cuts of their choosing in exchange for Biden’s demand to extend tax cuts to ordinary citizens.
Biden is unlikely to win with Democratic control of Congress, although Republicans could still filibuster the Senate. Even so, Democrats could then use the evasion mechanism to pass at least one major tax bill on a partisan basis, without any Republican input.
Overall, the odds are probably on the side of Republicans who think they can get a better tax deal after the election than before. But it’s still possible that they won’t be able to pass the corporate tax cuts presented to them now.
The Republican strategy is deeply cynical, needless to say, in that they prioritize what is good for their party and their chances of holding power over what might be good for the country. If you don’t already hate Congress, now you have permission to do so.
Democrats play this game too, of course, and the way to turn the Republican bet on itself is to convince voters that Republicans are only looking out for themselves at the expense of ordinary people. Democrat Harry Truman did this in 1948, when he unexpectedly won re-election by campaigning against the “inactive Republican Congress.”
Biden is already trying to do this by eliminating Trump and his fellow Republicans as billionaire sympathizers who want to cut taxes for the rich while cutting benefits for workers. However, Congress is such a den of dysfunction that it is sometimes difficult 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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