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Senate GOP jobs plan: details TBD

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Senate Republicans have put out a sweeping plan they’re dubbing the “Real American Jobs Act” — a pointed comeback to President Obama’s jobs bill, the American Jobs Act. It’s mostly a roundup of about two dozen GOP bills, ranging from health reform repeal and a balanced-budget amendment to EPA deregulation. But it also includes one significant new proposal that Republicans are billing as “comprehensive tax reform.” That sounds promising, but the GOP’s plan so far defers most of the concrete details — including how they’d pay for broad-based tax cuts — to later.

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Under the plan — unveiled Thursday by John McCain, Rand Paul, and a half-dozen of their colleagues — the entire tax system would be reworked. Individual income taxes would be at a maximum of 25 percent, with two marginal rates. The top corporate rate would be reduced to “no more than 25 percent,” a reduction from the current rate of 35 percent, according to an outline distributed to reporters. Senate Republicans promise that such reductions will be revenue neutral — or close to it. But they leave it to a Congressional committee to make the tough decisions necessary to accomplish this.

According to the plan’s outline, posted on McCain’s Web site, the Senate Finance Committee will have 90 days to come up with the “changes to credits and deductions” to make the income tax reductions revenue neutral. They’ll have the same amount of time to come up with the credit, deduction, and subsidy changes to offset the corporate tax reductions, “with priority given to eliminating all industry-specific provisions and revenue neutrality.” But the plan doesn’t prescribe anything beyond that, at least as outlined so far.

The lack of mandates to eliminate specific tax breaks make it easier for Senate Republicans to unite their caucus behind the plan. At Thursday’s press conference, McCain said “all but a handful” of GOP Senate caucus members were already on board, and he was confident that the rest would soon join. But it also leaves them open to the charge that their plan simply passes the ball on some big decisions, pushing for tax reductions they promise will be revenue neutral without specifically explaining how they’d offset them.

When I pressed him on this point, McCain simply responded that the Senate Finance Committee was “best equipped” to hammer out the details. “We are very confident that those actions can and will take place. We think we have a very good, comprehensive blueprint and plan,” he told me. When I asked him to give a few examples of tax breaks that could be conceivably eliminated, he suggested junking ethanol and sugar subsidies — and added that many of his colleagues would agree. “There are plenty, plenty of things that can be changed out there,” he said. “They aren’t hard choices — they aren’t hard choices.”

It was just a few months ago, though, that ethanol subsidies split the Senate Republican caucus, after Tom Coburn insisted on a vote to eliminate them. “This is a very controversial subject,” Senate Minority Leader Mitch McConnell said in June. “We have members in our conference on both sides of this issue.” To be sure, taking a scalpel to all industry-specific subsidies would arguably be politically easier than singling out any single one for cuts. The Senate Republican jobs plan seems to acknowledge that reality, but ultimately keeps those decisions at an arm’s length.

And ethanol and sugar subsidies are small elements of the tax code. To get to the rates McCain is promising, the reforms will have to take on the big deductions like the mortgage-interest deduction, the deduction for employer-based heath care, and the deduction for charitable giving.

Both Democrats and Republicans have gotten into the habit of deferring hard decisions until later, as evidenced by the debt-ceiling deal’s creation of the supercommittee. In the current political climate, that seems to be one of the few ways to achieve consensus — both within and across party lines. In fact, when asked which parts of their jobs bill Democrats would be most likely to support, Senate Republicans cited sweeping tax reform — which also includes repatriation and a repeal of the business withholding tax — as a major area of potential bipartisan agreement. “Clearly, we can join together,” concluded Sen. Ron Johnson (R-Wis.) at Thursday’s unveiling.

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