Republicans have a lot of big priorities for the tax code but limited space to get them all done. That’s because of pressure from House deficit hawks who are checking ambitions for the scope of the GOP’s tax bill at the moment.
In the weeks or months ahead, Republicans will have to weigh different tax priorities, including what President Donald Trump wants.
The Trump administration has outlined a list of proposals on top of permanently extending the portions of the 2017 Republican tax cut law that expires at the end of the year.
We’ve got your guide to the dynamics around the items on Trump’s tax wish list that could affect whether or how they make it into the final tax bill.
No tax on tips: This idea took on life during the presidential campaign with Republicans and Democrats getting behind the Trump pitch. In the White House, Trump has made clear that getting rid of taxes on tipped wages remains a priority.
Republicans will need to settle how to structure a “no tax on tips” provision, and it’ll need limits to make sure it doesn’t become a loophole. Tax writers have talked about options like making the benefits industry-specific or capping them based on income.
Boost for seniors: Trump wants to cut taxes on Social Security benefits. But there’s a clear hurdle for this one. Republicans are using the reconciliation process to pass their tax bill because it avoids a Senate filibuster.
Reconciliation rules don’t allow for packages that include changes to Social Security, however, so they’d likely need to find another way to give a boost for seniors.
Overtime pay: Trump argued on the trail that cutting taxes on overtime pay would be an incentive for people to work. But this is a challenging tax policy to craft for lawmakers, and it could get expensive.
Made in America benefit: Republicans have been exploring different ways to follow through on Trump’s campaign pitch to give another corporate rate cut for companies that manufacture in the United States.
There are lots of different ways that the GOP could craft the “made in America” boost. But whatever the structure, look for Republicans to argue this one helps grow the economy and lessen the budget hit from other tax cut priorities.
SALT: The 2017 tax bill that Republicans want to renew capped deductions for state and local taxes at $10,000. The “SALT cap” expires with other tax cuts at the end of December.
But most Republicans want to extend it, which puts blue-state GOP House members who oppose the limit in a bind. Trump has now said repeatedly that he wants to do more on SALT this time around.
It’s a win for New York, California and New Jersey Republicans fighting for SALT relief. But a cap of some sort is pretty much certain to stick around. This will still be a sticky battle on Capitol Hill.
Carried interest: Trump wanted to get rid of beneficial treatment for this form of income — which benefits investment fund managers and private equity firms — back in 2017. That didn’t happen.
Now Trump is back on the issue again. But some Republicans, including Senate Majority Leader John Thune, have been opposed to cracking down on the “carried interest loophole.” So this isn’t a slam dunk for the administration.
A crackdown on sports team owners: This was the surprise entry on the Trump administration’s list for many tax lobbyists and aides.
It’s not clear what exactly Trump wants, but there are a number of ways that lawmakers could go after benefits that end up flowing to sports team owners if they want. For one, Republicans could change the treatment for municipal bonds used to finance stadiums, which are currently tax-free.
Still, it’s unlikely this is a major revenue raiser, which would come in handy for Republicans as they try to make room for huge tax cuts.
