Before President Trump had even signed the $1.5 trillion tax cut last December, Republican lawmakers began planning “Tax Reform 2.0,” an additional $630 billion in tax reductions that they hoped would help shore up successful midterm campaigns.
Trump would later promise even more, teasing a massive middle-class tax cut.
Those grand ambitions unceremoniously fizzled this week, when Trump and a top House Republican issued a joint statement saying they would not take any steps until next year, closing the book on their 2018 efforts. The statement, released late Wednesday when much of Washington was escaping the office for Halloween, demonstrated the chasm between aspirations and results on one of the GOP’s core promises.
The 2017 tax cut is “something I talk about, but I don’t get standing ovations or anything like that. I don’t get booed, either,” said Rep. James Comer (R-Ky.). “It’s probably not resonated real well with the average voter. But again, I talk about it.”
Now, with their 2018 tax plans having failed to come to fruition, and their 2017 tax law still polling poorly, Trump and a number of other Republicans have made a hard pivot away from economics and into nationalism, a debate with heavy racial overtones meant to energize the conservative base ahead of Tuesday’s midterm elections.
The shift has seen a party that planned a traditional conservative economic message return instead to the themes Trump hit heavily in his 2016 GOP takeover: claiming that immigrants pose a threat and that Democrats are eager to let them in.
“If you don’t want America to be overrun by masses of illegal aliens and giant caravans, you better vote Republican,” Trump said Thursday at a Missouri rally.
The tax effort unraveled because Trump never fully bought into the House Republican plan to focus the new tax bill on dealing with the expiration of temporary cuts. Instead, the president wanted to deliver more immediate relief to the middle class, something he felt would resonate with voters quickly. Compounding matters, a sliding stock market and an October panic over the budget deficit diminished interest within the party for another round of tax cuts as questions began to arise about the effectiveness of the 2017 law.
Much of Republicans’ struggle stems from a tactical decision by the White House and GOP leaders one year ago, when they made tax cuts for businesses permanent but reduced taxes only temporarily for individuals and families. The decision was intended to limit the tax cut’s projected addition to the budget deficit, allowing the GOP to get the measure through the Senate despite unanimous Democratic opposition.
But it outraged critics who said the tax plan was a giveaway for corporations and a short-term sugar high for everyone else, and played directly into Democrats’ main criticism of the effort as a boondoggle for the rich.
As the attacks intensified in December, House Ways and Means Committee Chairman Kevin Brady (R-Tex.) received a commitment from top GOP leaders that he would be able to pursue another round of tax cuts this year, making the temporary rate reductions permanent for all families.
In January, as part of a spending deal, Republicans were able to push an additional $31 billion in tax cuts into law by delaying certain elements of the Affordable Care Act. The party had just strung together two tax cuts in a row. It was on a roll.
That’s when the GOP strategy began showing signs of faltering.
This summer, Brady and other Republicans went to the White House to go over their 2018 tax strategy with Trump, cognizant of his huge role in mobilizing public backing for the 2017 law. The president was mildly supportive, people familiar with the meeting said, speaking on the condition of anonymity because they weren’t authorized to describe the exchange. But he felt that the public wanted something more immediate and direct.
Promising to extend tax cuts that would otherwise expire in seven years was fine, Trump told them, according to two people familiar with the exchange, but Republicans should be doing something that would affect voters as soon as possible. He prodded them to pursue a new tax cut that would focus solely on the middle class.
Some Republicans at the meeting were noncommittal, worried about overpromising voters and aware of how difficult it had been to pass the law in 2017, and the session ended without any agreement on how to proceed.
At the same time, as the midterm campaign season was heating up, the tax law was dropping in polls, and Trump was not focused on selling it. Republicans who’d planned to make it the centerpiece of their campaigns began to look elsewhere, despite exhortations — supplemented by candy bribes — from House GOP leaders.
Another setback came when a strategic disagreement between House and Senate Republicans spilled into the open over legislation to make last year’s individual tax cuts permanent.
House Republicans were eager to hold a vote, which they believed would put Democrats on the spot while neutralizing criticism that the tax law was overly tilted toward corporations. But Senate GOP leaders had no intention of giving vulnerable Democrats in their chamber the opportunity to vote for a round of tax cuts that would probably fail to pass anyway because of the difficulty of reaching the needed 60 votes.
Nonetheless, the House pushed the legislation through in September, and Speaker Paul D. Ryan (R-Wis.) lauded the outcome, saying that it “will help ensure a more prosperous America for years to come.”
But House Democrats, few of whom are in competitive races this year, had scant qualms about voting against it nearly unanimously. The few Democrats who broke ranks to vote “yes” included two who are running for Senate, in Arizona and Nevada — giving them an easy talking point to combat Republican attacks about their opposition to the initial round of tax cuts.
Senate Republicans never voted on the bill or even moved to bring it up on the floor, and it attracted little notice.
“I didn’t pay attention because I thought it was for theatrics,” said Steve Moore, who was an economic adviser to Trump during the 2016 campaign and helped rally the party behind last year’s tax cut push.
As the elections neared, Trump made clear that he wanted a proposal to be made public in October so voters would know that Republicans planned to continue cutting taxes, creating a contrast with Democrats.
Congressional Republicans, however, never readied a plan, and new problems were brewing.
On Oct. 15, the White House and the Treasury Department reported that the budget deficit in the fiscal year that ended Sept. 30 had risen 17 percent to $779 billion, an increase Democrats and many budget watchers said was due to a steep drop in revenue from corporate tax cuts. Republicans denied this, but they were under pressure to explain why they were expanding the deficit after years of demanding it shrink.
Some White House officials and GOP leaders in Congress were becoming worried that they could encounter major political and logistical problems dealing with the deficit next year, and face accusations of budget hypocrisy from Democrats on Capitol Hill. In early October, when the deficit fears were inflamed within the GOP, substantive tax cut discussions had halted, said people close to the process who spoke on the condition of anonymity because they weren’t authorized to disclose internal party planning.
But that all changed Oct. 20. That’s when Trump, speaking to reporters after a political rally in Nevada, said that Republicans were going to advance a new round of tax cuts for the middle class and that this would happen “sometime just prior, I would say, to November.”
Few Republicans, including many in the White House, knew what Trump was talking about at first. They were stunned, and it was unclear how the president expected them to proceed. But two days later in Washington, Trump told reporters that the plan would be a 10 percent tax cut for the middle class, not for businesses. A flurry of phone calls between the White House and congressional aides and lawmakers ensued.
“The president reiterated, ‘We are going to have a middle-class tax cut,’ ” said Grover Norquist, president of Americans for Tax Reform. He said that immediately after Trump’s comments, questions started bubbling up, “Okay, well, then when and where?”
Norquist said he was excited by the idea, as it represented a commitment from Republicans to pursue new tax cuts every year, building on what they’d already done.
And some House Republicans, many of whom had all but given up on winning the public relations battle over the existing tax law, embraced the idea.
“If you look at the tax bill, it was a complicated, nuanced bill, it dealt with lots of issues because we hadn’t reformed it in 31 years,” said Rep. Darin LaHood (R-Ill.), a Ways and Means Committee member. “As I look at the president’s proposal, this is much more simplified, it’s targeted . . . it’s for the middle class, and I think that’s something that will be much easier to get through.”
Conversations between congressional aides and White House officials began immediately. Brady offered his support but suggested that there might not be any action until 2019.
Senate Republicans were largely absent from the talks.
Trump, though, stuck with the idea, saying there would probably be some sort of “resolution” from Congress in October that stipulated the goals for the reductions. But White House officials and congressional leaders never agreed on seeking a resolution, and that idea evaporated as well, leading to the joint statement on the afternoon of Halloween that included few words about what their plans would ultimately be.
Any such action would be contingent on Republicans retaining their House majority.
“We are committed to delivering an additional 10 percent tax cut to middle-class workers across the country,” the statement issued by Trump and Brady said. “And we intend to take swift action on this legislation at the start of the 116th Congress,” which begins next year.
Less than 24 hours after the statement, Trump garnered international media attention with a White House event. But he barely mentioned the tax cuts.
Instead, he discussed the need to make it harder for immigrants to get asylum, an escalation of his newly adopted midterm message.