Bloomberg: Conservative Democrats Embrace Parts of GOP Tax Plan

Oct 4, 2017
In The News

A group of conservative House Democrats is embracing some elements of a GOP plan to cut taxes, potentially creating an opening for Republicans to win bipartisan support.

The Blue Dog coalition, which has 18 members in the House, said it’s open to lowering business taxes, the first significant sign of a crack in Democratic opposition to the GOP approach. Their position was included in a plan released Wednesday outlining the group’s stance on taxes.

The Blue Dog proposal comes as Republicans are trying to build support for their nine-page tax framework, released last week, which faces opposition from many Democrats and objections raised by a handful of GOP lawmakers. Tax-writing committees in the House and Senate must now settle some of the most divisive issues, including where to set the top individual income tax rate and whether cuts should be paid for.

It remains to be seen whether lawmakers from the Blue Dog group can resolve their policy differences with the GOP plan and support a measure Democratic leaders oppose. Republicans would benefit from attracting Democratic votes and being able to market the legislation as bipartisan.

Lowering Rates

In their plan, the Blue Dog group indicated a willingness to lower the tax rate for corporations and pass-through businesses, which include partnerships and limited liability companies. Democrats have largely opposed those changes, arguing the Republican plan is too generous to businesses and the wealthy, and not helpful enough for the middle class.

The GOP tax framework calls for cutting the corporate tax rate to 20 percent, down from 35 percent. It would set the rate on pass-through income at 25 percent, down from a current top rate of 39.6 percent.

The Blue Dog group differs with the Republicans over whether an overhaul should add to the deficit. The group says a tax overhaul shouldn’t increase the deficit, while the Republican framework is estimated to add $2.4 trillion to the deficit, according to an estimate by the Tax Policy Center.

“This tax reform policy has to be paid for,” said Representative Mike Thompson, a Blue Dog member from California. “Hocus pocus is not one of the Blue Dog principles.”

The Blue Dog plan urges Republicans to abandon the process they’re using for considering tax legislation. Republicans plan to seek passage of a tax overhaul on a simple majority vote in the Senate, where the party holds 52 seats, instead of the 60-vote majority generally needed to pass legislation. The Blue Dog group also wants to ensure there are complete estimates of the ultimate plan’s cost by the Joint Committee on Taxation and the Congressional Budget Office.

Republicans have said they hope to have Democratic votes for their tax plan, but have given few signs that they’re willing to negotiate. Blue Dogs say that if Republicans are unable to pass their framework -- as occurred with the party’s failed attempt to repeal Obamacare -- President Donald Trump will be forced to negotiate with Democrats.

“I’m hopeful that things will change in terms of how Republicans are gonna go about this,” said Representative Dan Lipinski, an Illinois Democrat and the Blue Dogs’ co-chairman for policy. “It may take a failure to be able to pass something with Republicans only in order for Republicans to get to that point.”

The Blue Dog plan doesn’t offer specific tax rates or policy proposals for encouraging businesses to invest in the U.S., one of Republicans’ stated goals. The plan expresses openness to repatriation policies that bring corporate cash back to the U.S. “while also ensuring an adequate taxation rate for the cash and working assets held overseas.”

The group is aiming to help craft the GOP legislation. The group sent a letter to House Speaker Paul Ryan of Wisconsin and Ways and Means Committee Chairman Kevin Brady of Texas requesting “a real seat at the negotiating table.”

The coalition members said that while they are open to negotiating, they don’t want to be used as props to boost a Republican plan. “We are not potted plants,” said Representative Mike Thompson, a Blue Dog from California.

House Minority Whip Steny Hoyer, a Maryland Democrat, praised the Blue Dogs in a statement for seeking a bipartisan approach, saying their plan “would help start a dialogue.” He didn’t endorse their policy proposals.

Democrats risk angering their core supporters by endorsing Republican tax plans. Representative Tim Ryan, an Ohio Democrat who isn’t part of the Blue Dog Group, upset liberals in August when he endorsed lowering the corporate tax rate.

“We can’t just be the party of redistribution of wealth; we need to be the party of the creation of wealth in communities all over the country, not to just Silicon Valley, not just Wall Street, but all over,” Ryan told The Hill newspaper.

In response, a coalition of progressive groups, including and the Progressive Change Campaign Committee, purchased TV ads accusing him of helping "Republicans pass a tax bill that gives billions more to the richest."

Representative Henry Cuellar, a Texas Democrat and the Blue Dog communications co-chairman, said Democrats need to change what he described as an anti-business image.

“I don’t think it’s healthy for our party,” he said.