Budget vote raises red flag for GOP on tax reform

The tight 216-212 House vote Thursday to pass the GOP budget is raising a red flag for Republicans on tax reform.

The GOP barely scraped up enough votes to pass their partisan budget, as 20 on their side defected.

That included 11 GOP lawmakers from New York and New Jersey who wanted to send a message about the need for their leaders to compromise on plans to eliminate the state and local tax deduction, which could hit their districts hard.

In reality, Republicans probably were always going to be able to pass the budget, a critical step toward tax reform since it unlocks rules that would protect the GOP legislation from a Democratic filibuster in the Senate.

{mosads}But a number of lawmakers held their votes until the end on Thursday, telling leaders that they will have to deal with them on the tax bill if they want it to be approved.

“There were many members who voted ‘yes,’ but they were holding their nose while they did it,” said Rep. Tom MacArthur (R-N.J.), who voted “no.” “They voted yes to keep the process going forward. It doesn’t mean they’re voting for the status quo of the tax framework, though.”

None of this means the House will be unable to pass their actual tax-reform package, which is to be released next week and will be marked up in committee on Nov. 6.

Republicans are under intense pressure to get the tax bill approved given the failure to repeal ObamaCare. Nearly a year of unified GOP government has yet to include a major legislative victory.

Given those political circumstances, it’s a good bet that many Republicans will back their party’s tax plan as a way of showing their constituents they are getting something done.

At the same time, GOP leaders must avoid a number of pitfalls to get the tax bill through the House — some of which were previewed on Thursday.

A handful of conservative Republicans — including Reps. Walter Jones (N.C.), Thomas Massie (Ky.) and Justin Amash (Mich.) — voted against the budget because it did not cut spending as deeply as a previous GOP blueprint. These Republicans are often mavericks, and while they may back their party’s tax-reform bill, it is difficult for leaders to depend upon them.

Then there are the GOP lawmakers from blue states who do not want to see the valuable state and local tax deduction ended. They made the most noise on Thursday.

“The ‘no’ vote on the budget was a statement from the New York delegation basically that we’re serious about the state and local tax deduction,” Rep. John Katko (R-N.Y.) said. “We’re all willing to be flexible, we’re all willing to find a compromise. We want to make it clear to them that we’re not going to stay at the language in the budget, which basically said the state and local deduction is one of our targeted things to take out.”

Other potentially controversial provisions are coming, including possible changes to the tax status of 401(k) plans that are bound to be controversial with some members. To get tax reform to the Senate, GOP leaders in the House will have to satisfy their members on future controversies.

Then there is the question of how much the tax bill will add to the deficit. Republicans are seeking ways to lower the tax bill’s cost, including through the state and local tax deduction talks and the possible changes to 401(k) rules.

As with the House effort to repeal and replace the health-care law, GOP leaders will have to balance accommodating demands from both centrists and conservatives.

Several conservatives balked at supporting the Senate budget out of concern for its impact on the deficit.

“I think history is going to judge the young members of Congress the harshest if we facilitate generational theft through a tax bill that isn’t paid for and a budget that doesn’t even have the aspiration to balance,” said 35-year-old freshman Rep. Matt Gaetz (R-Fla.), who voted against the budget.

GOP leaders anticipated going in that passage would be tight, based on the whip count over the past two days. They needed a minimum of 215 votes given lawmaker absences.

Speaker Paul Ryan (R-Wis.), who rarely casts floor votes in keeping with custom of his predecessors, voted in favor of the budget, offering an early indicator that the budget would pass narrowly.

With the vote held open past the allotted 15 minutes, House Budget Committee Chairman Diane Black (R-Tenn.) kept her eyes intently on the board, nervous anticipation on her face.

House Majority Whip Steve Scalise (R-La.) and his chief deputy, Rep. Patrick McHenry (R-N.C.), huddled with fellow members of the whip team on the floor as they neared the minimum number.

Ryan stood nearby, intently watching the vote tally broadcast on a wall of the chamber that shows each House member’s position.

Katko, a top Democratic target in 2018, hovered near the whip team and waited to cast his vote against the budget until moments before the gavel went down. Another vulnerable Republican, Rep. Darrell Issa (Calif.), who voted “yes,” was among the last to vote.

Some observers said the end result on Thursday was a major victory for Ryan and his team.

“This was a win for leadership,” said Sage Eastman, a former Ways and Means Committee aide who now works as a lobbyist at Mehlman Castagnetti. “They muscled the budget through without having to go to conference and without having to negotiate a tax deal.”

Many Republicans from high-tax states voted for the budget.

These include Rep. Tom Reed (N.Y.), who serves on the Ways and Means Committee, Rep. Chris Collins (N.Y.), an early endorser of Trump, and Rep. Rodney Frelinghuysen (N.J.), chairman of the House Appropriations Committee. All Republicans from California and Illinois voted in favor of the budget measure.

“They now have the runway clear to move the tax bill,” said Eastman. “It doesn’t make the tax bill any easier or harder, but it does give them the chance to land it.”

Rep. Peter Roskam (R-Ill.), a senior Ways and Means Committee member whose Chicago-area district has many residents who take the state and local deduction, said tax writers “are looking to create middle class tax relief.”

“Tax reform does not mean the redistribution of a tax liability from one part of the country to another,” Roskam, who voted for the budget, said on the House floor. “It means tax relief for everybody.”

Niv Elis contributed.