The early-stage discussions reflect Trump’s desire to refocus the economic narrative amid some signs of a slowing economy, and after the major Republican tax cut package of 2017 failed to produce enduring economic benefits or political gains for the GOP.
“We are having those discussions with the White House, we’ll be engaging with them further, and we’ll have discussions with Republicans, too, in the House about what we think the most pro-growth elements can be the most pro-innovation. And I think the key is to make permanent some of the key provisions as well in tax reform,” said Rep. Kevin Brady (R-Tex.), the top Republican on the tax-writing House Ways and Means Committee.
The Commerce Department said Wednesday that the economy grew at a 1.9 percent annualized rate, falling short of Trump’s goal of 3 percent annual growth. The Federal Reserve on Wednesday cut interest rates for the third time this year to try to boost more growth. Business investment has now contracted for six straight months, a marked slowdown, even as the tax law and new spending increases have helped dramatically balloon the country’s federal deficit to close to $1 trillion annually.
Brady was a key architect of the 2017 tax cut law and said in an interview that the goal was to produce “a growth agenda with the most pro-growth tax code we can create, along with, of course, we’re always looking for more middle-class tax cuts.”
While emphasizing no decisions had been made, Brady said the issue was a priority for the president.
“I expect a Republican agenda on growth for the 2020 election,” he said.
Some White House aides have pushed for creating a sharper contrast between Trump’s tax cut message and the push by the Democrats’ presidential candidates to roll back the 2017 tax cuts, particularly those for corporations.
Any tax or economic stimulus package produced by the White House and congressional Republicans would face certain death in the Democrat-controlled House, but Republicans are hopeful it could give them a new platform to run on in 2020. They have also said there are parts of the 2017 Tax Cuts and Jobs Act that they want to revisit.
Many of the noncorporate tax cuts in that law will expire at the end of 2025 absent congressional action, as will other provisions, such as increased child tax credits. These are the tax cuts that target benefits for families and that Republicans believed were a key selling point in the law. By contrast, Republicans made the corporate tax cuts in the law permanent.
White House officials have called for making the expiring tax cuts permanent, as well. They have not called for offsetting the higher costs of these tax cuts, though, which are estimated to add hundreds of billions of dollars to the debt over the next 10 years.
A senior administration official, speaking on the condition of anonymity to discuss confidential deliberations, said that a wide range of proposals were being reviewed for potential inclusion in the new package. The official did not specify what they were but said they went well beyond tax cuts to include broader economic policy initiatives. In the past, Trump has floated ideas including reducing the payroll tax and indexing capital gains to inflation, among other things.
Trump has spoken both in favor of those ideas and in opposition to them, sometimes changing course in a matter of days, making it hard to ascertain the White House’s approach.
Rep. Mark Meadows (R-N.C.), a conservative leader of the House Freedom Caucus who is close with Trump, said that the president has discussed a “tax cuts 2.0” package “and trying to make it something that addresses — I don’t want to say middle income because he doesn’t say middle income — I think more ‘working America.’”
“I think it’d be valuable for everybody,” Meadows said. “The president wanting to reduce taxes to working America is a plus, will be viewed as a plus, but not just for Republicans, for Democrats, as well.”
Democrats, however, were quick to dismiss the idea.
Rep. Lloyd Doggett (D-Tex.), a senior member of the Ways and Means Committee, said that a new tax cut plan from Trump would go “nowhere.”
“I would expect this would just be another distraction from the fact that he’s about to be impeached,” Doggett said, adding that the committee has plenty of work to do already “to correct the many shortcomings of his last bill.”
Before the 2018 midterm elections, Trump promised voters that he would deliver a sizable middle-class tax cut if Republicans retained control of the House of Representatives. Republicans lost the House during that election, and Trump appeared to drop the idea for months after that.
Democrats have alleged that the 2017 tax law disproportionately helped corporations and the wealthy. The tax cut law has lowered the tax bills of most Americans, but it continues to poll poorly with the public. Democrats concluded long ago that they won the messaging war over the legislation — a point many Republicans concede. The $1.5 trillion legislation also has so far failed to fulfill Republicans’ repeated promises that it would generate so much new revenue through economic growth that it would offset the costs of lower rates.
In combination with big spending bills passed by Congress and signed by Trump, the deficit has soared to nearly $1 trillion during Trump’s presidency, growing by close to 50 percent.
The Democrats running for president have discussed rolling back portions of the 2017 law — or repealing it entirely — to pay for new proposals of their own. A frequent focus for Democrats is the corporate tax rate, which was lowered from 35 percent to 21 percent in the law and which several Democrats propose increasing to 25 percent or higher.