Blue Dog Dems dare Republicans to talk tax

The Blue Dog Coalition of centrist Democrats released a set of tax-reform principles on Wednesday urging Republicans to include them in negotiating their attempt to overhaul the tax code.

The 18-member group laid out seven main priorities, three of which the Republican tax framework meets. The Blue Dogs largely agree with Republicans on elements of a tax overhaul for businesses, but differ from the GOP on the process and revenue targets.

{mosads}“In order to go into any kind of negotiation prepared, you must know your principles,” said Rep. Henry Cuellar (D-Texas), Blue Dog Co-Chair for Communications, said in a statement. “The Blue Dogs are taking the first step in what we hope is the larger negotiation process with congressional Republicans on tax reform.”

The outline demonstrates where moderate Democrats have common ground with Republicans on taxes but also that challenges remain for the GOP if they want Democrats to back a future bill.

Some match those of Democrats across-the-board, such as revenue neutrality and a focus on the middle class. But some Democrats and liberal groups have pushed back against policies that they view as too friendly to large corporations.

Speaker Paul Ryan (R-Wis.) has said he expects that a tax bill will get votes from some Democrats in the House. Backing from centrist Democrats could be important if a number of Republicans balk at various provisions in the legislation.

In a press conference Wednesday afternoon, Blue Dogs made it clear that they want to be active participants in the tax process and don’t want to simply be asked to back a bill released by Republicans.

“We don’t want to be props,” Cuellar said. 

The Blue Dogs are calling for a tax overhaul that improves business competitiveness,  a goal that Republicans share.

Three of the group’s main principles focus on this topic: A more competitive corporate tax rate and structure, lowering taxes for small businesses structured as “pass-through” entities while preventing taxpayers from abusing the lower rate, and incentivizing business innovation.

But on other issues, the Blue Dogs and Republicans are farther apart.

Many Republicans have signaled that they are willing to support a tax bill that loses revenue, at least in the short run, if it increases economic growth.

But the Blue Dogs also said that tax reform needs to be “credibly revenue neutral” and should not be paid for through the use of “unrealistic” economic growth assumptions. They want tax legislation to be revenue neutral on a “static” basis, before economic effects are considered, rather than through “dynamic scoring” that factors in economic growth.

“This cannot be a tax cut,” said Rep. Mike Thompson (D-Calif.).

Rep. Jim Costa (D-Calif.), Blue Dog Co-Chair for Administration, said that a tax proposal estimated to lose revenue in its first five years and gain revenue in its second five years due to “dynamic” scoring “is simply in my view fantasyland.”

The Blue Dogs also said that tax legislation shouldn’t move through a process known as “reconciliation” that allows a bill to pass on a party-line vote in the Senate. Republicans have said they intend to use reconciliation for tax reform.

“Republicans must stop catering to the extremes of their party and pursuing the failed, partisan reconciliation process. History proves that a bipartisan effort can lead to success on tax reform,” Cuellar said. “And at the end of the day, what the American people want is for Democrats and Republicans to stop the partisan bickering and to do our job – to govern.”

The Blue Dogs called for tax reform that focuses on the middle class, arguing that legislation should not “shift the distributional balance to the wealthy.”

Republicans said in their framework that they want a new tax code to be at least a progressive as the current tax code, but an analysis from the Tax Policy Center, a think tank that considers itself nonpartisan, found that the plan would provide the biggest benefits to the wealthy. Key GOP lawmakers have pushed back on the TPC report and have accused the group of bias and inaccurate assumptions.

Additionally, the Blue Dogs called for linking tax reform with infrastructure funding, while the GOP plan does not mention transportation.

– updated at 3:40 p.m.