The Do-Nothing Senate Tackles Tax Reform

Right From the Start

Last week a group of Republican senators sent a letter to Senate Majority Leader Mitch McConnell urging Mr. McConnell to extend the working days and hours of the United States Senate. The petitioners were Sens. David Perdue (R-GA), Steve Daines (R-MT), Joni Ernst (R-IA), Dean Heller (R-NV), Ron Johnson (R-WI), John Kennedy (R-LA), Mike Rounds (SD), Luther Strange, (R-AL), Roger Wicker R-MS), and Dan Sullivan (R-AK). Not surprisingly, with the exception of Mssrs. Wicker and Johnson, the remaining members are all first term senators. Also not surprisingly, not a single member of the Republican elites (Sens. John McCain (R-AZ), Jeff Flack (R-AZ), Orrin Hatch (R-UT), Thad Cochran (R-MS), Lindsey Graham (R-SC), Bob Corker (R-TN) nor Lamar Alexander (R-TN) joined in the request.

The United States Senate works three days a week. Sessions are generally less than two hours and attendance is light unless there is a vote on a critical issue. Even at that, the Senate is not “in session” for over 90 additional days – not including weekends. Ninety weekdays is the equivalent of eighteen work weeks – nearly one-third of a calendar work year.

So you have to ask yourself just what is that the Senate does? The Senate considers legislation originating in the Senate as well as bills delivered by the House. In addition, the Senate passes on judicial and executive appointments. The Hill reported in May of this year that there were about 400 bills stuck in the Senate that had been considered and passed by the House of Representatives and delivered to the Senate for action. One of them was the repeal and replacement of Obamacare. Nothing has changed. Nothing of substance – other than a bunch of BS resolutions proclaiming this and that – have passed the Senate. Even the recently adopted budget resolution is just that – a resolution without substance.

It is difficult to accumulate the number of executive agency appointments that have been made by President Donald Trump and remain unconfirmed by the Senate. A senior staff member from Mr. Perdue’s office noted that in a comparable period of time, Mr. Trump has had only 172 nominees confirmed while former President Barack Obama had 359 confirmed and President George W. Bush had 375 confirmed. A check of Wikipedia indicates that only 4 of 19 nominations to the Court of Appeals have been confirmed, 2 of 39 to the District Courts, 0 of 3 to the Court of Federal Claims, and 0 of 2 to the Tax Appeals Court. This isn’t an issue of Democrat obstructionism since the Republicans hold a four-vote majority position and the filibuster rule has been waived for judicial and executive appointments. There are still a number of tricks that the Democrats are using but they are Senate “courtesies” rather than rules and can be ignored by Mr. McConnell at any time. (In fact he did just that in August to push through a number of appointment confirmations.)

So in a nutshell what does the Senate do? Damn little.

But there may be a glimmer of hope. The letter by the eleven senators has spurred Mr. McConnell to announce an extended work schedule. Nothing that will tax the prima donnas who roam the halls of the United States Senate looking for media opportunities and always accompanied by their earnest looking staff. But it could be a start.

The passage of the budget resolution paves the way for consideration of the tax reform package – a “must-do” if there is to be any hope of maintaining a Republican majority in the Senate after the 2018 election.

But there are a couple of issues that the likes of Mr. McCain can seize upon in order to defeat tax reform. The first is whether state and local taxes can be deducted in determining the federal income tax. The pending tax reform has nearly doubled the standard deduction in exchange for eliminating all deductions with the exception of charitable contributions and mortgage interest. This is an issue for high tax states like New York, California, Oregon, Connecticut and Massachusetts. Note all of these states are run by overwhelming Democrat majorities who have continued to increase taxes to fund their welfare state and reward their contributors – the public employee unions, the wind and solar remoras, and the race hustlers. A better solution would be to give the high tax states the alternative of either accepting the new expanded standard deduction or continue with the current itemized deductions. The election would have to be made by the state legislatures every two years. By doing this, each state would have to explain to their residents why they continue to require them to use the 1040 long form in order to benefit the very rich who are the primary beneficiaries of the state tax deductions. (The expanded standard deduction actually covers the overwhelming majority of taxpayers with the exception of the high-income earners.) In these high tax states the same people who are agitating against tax reform because it will benefit the wealthiest are doing precisely that by objecting to the expanded standard deduction in lieu of itemization.

The second is whether there should be an additional bracket for the wealthy to avoid accusation of a tax reform package primarily benefiting the rich. This is an issue the Democrats love to raise because they know that no matter how you structure tax reductions the people who pay the most taxes will get the largest numerical tax break. It’s simply mathematics. Let’s remember that one-half of people who file tax returns pay no federal income taxes. These are people generally earning less than $50,000 per year. According to Forbes those earning in excess of $100,000 per year pay 80 percent of all federal income taxes. You cannot reduce taxes on people who do not pay taxes. That means that nearly half of all taxpayers will not get a tax reduction. No matter how you reduce taxes the majority of the benefit will fall to those who actually pay taxes. And the Democrats know that and use it to whine about “inequity” in tax reductions.

The best solution for this issue is for the Democrats to be honest. Failing that, the next best solution is for the mainstream media to be honest. In the end neither will happen and the Republicans will give into a make-believe narrative about benefiting the rich at the expense of the poor and create another bracket for the wealthy. Be that as it may, the wealthy will still benefit because of the reductions in the subchapter S, capital gains and dividend taxes.

But I am probably getting ahead of myself. We have to remember that Mr. McCain still lurks in the shadows waiting for another opportunity to stab Mr. Trump and his fellow Republicans in the back. And Mr. Corker, still smarting from Mr. Trump’s refusal to back him in 2018 is likely to join the back-biting Mr. McCain. The likelihood of the Republican majority passing a legitimate tax reform package is about the same as that of repealing and replacing Obamacare. As I said last week, failure to pass a legitimate tax reform package will insure the defeat of the Republican Party in the United States Senate in 2018 – and possibly the House as well.

And when the people of Arizona and Tennessee are looking on in dismay they can thank the senators they sent to Congress who never gave a whit about them.