House Budget Delayed as Freedom Caucus Seeks BAT Death Knell

For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

By Jonathan Nicholson and Kaustuv Basu

Committee action on a budget resolution that would help pave the way for tax reform was delayed June 27, as House Republicans continued to grapple over conflicting priorities for the document.

Some House Budget Committee members had hoped to see a markup on June 29. The postponement means the budget will join a lengthy list of items fighting for lawmakers’ attention and time in the three weeks Congress is slated to be in session in July.

Republicans view the resolution as key to pushing a tax overhaul through Congress, because filibuster-proof legislation for tax reform would be spun off from one of its reconciliation instructions.

Committee Chairman Diane Black (R-Tenn.) said the panel would keep working on a budget after the July 4 recess, though she declined to say when she thought it would be ready for committee action.

“I will continue to say I don’t have a date for you,” Black said. “We are going to bring a budget out of our committee and then whatever happens to it next will be up to the conference.”

‘Viable Path’ Exists

Black said she remains optimistic about eventually getting a budget plan that House Republicans can rally around. “I do see a viable path and I’m going to continue to push until we have that 218 mark, and I’m going to push until we get it out of our committee,” Black told reporters June 27 after a weekly House GOP conference meeting.

The delay came a day after leaders of the House Freedom Caucus said they wanted a higher deficit reduction total for House committees to meet under their reconciliation instructions. Black and House GOP leadership have offered the group of conservative and libertarian House GOP members $200 billion over 10 years in deficit reduction through the reconciliation process.

House Speaker Paul D. Ryan (R-Wis.) has said tax reform will be finished by the end of 2017—later than his original target of getting it done before a planned five-week congressional break in August. But with efforts to repeal the Affordable Care Act stalled in the Senate and no budget in place to give a tax bill protection from a Democratic filibuster in the Senate, the legislative window is narrowing.

BAT Really Dead?

Freedom Caucus leaders said June 27 they want assurances that Ryan’s preferred way to offset much of the costs of a tax overhaul—a border adjustment tax—is off the table.

“Before we move forward on a budget, we need to know the answers to some pretty important questions, like is the border adjustment tax really dead and are we going to have real savings over time to offset big increases in discretionary spending?” said Rep. Jim Jordan (R-Ohio), one of the founders of the Freedom Caucus. “Now that’s as Republican as it gets. So that’s all we’re saying.”

Rep. Mark Meadows (R-N.C.), the Freedom Caucus chairman, said some decisions needed to be made on a tax reform package before trying to do budget reconciliation instructions. “Going to a new budget reconciliation without understanding in principle where we are going on a border adjustment tax would be very difficult to do,” he said.

In lieu of the money from a border adjustment tax, large spending cuts would be needed to avoid driving up the budget deficit, said Rep. Dave Brat (R-Va.), a member of the Freedom Caucus and the House Budget Committee. He said the Freedom Caucus shouldn’t be blamed if the tax overhaul stalls.

“The chairmen who don’t want to give savings on mandatories to pay for the defense buildup, that’s the issue,” Brat said. “We’re not blocking anything. We’re just doing math and it’s all got to add up.”

More Time Needed

Black said she is still negotiating with committee chairmen about their proposed savings targets. Agriculture Committee Chairman K. Michael Conaway (R-Texas) said, “We’re still working with Diane to get to a ‘yes.’ I’m not the only issue they’ve got.”

A House GOP aide, speaking on condition of anonymity, said the delay in marking up the budget resolution was in part the result of the decision to increase the savings target for the committees from $150 billion to $200 billion, in an effort to placate the Freedom Caucus. How to allocate those extra spending cuts among the 12 committees affected couldn’t be worked out in time to schedule a markup during the week. “We just needed more time to do that,” the aide said.

To contact the reporters on this story: Jonathan Nicholson in Washington at jnicholson@bna.com; Kaustuv Basu in Washington at kbasu@bna.com

To contact the editors responsible for this story: Paul Hendrie at pHendrie@bna.com and Meg Shreve at mshreve@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Daily Tax Report