Republicans Release Budget Blueprint in Step Toward Tax Overhaul

By Kristina Peterson and Richard Rubin Features Dow Jones Newswires

Senate Republicans on Friday released their budget blueprint for fiscal year 2018, signaling that GOP leaders are shifting their focus to reducing taxes by $1.5 trillion over a decade and overhauling the tax code after the collapse of their effort to roll back the Affordable Care Act.

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The budget resolution for the year ending September 2018 serves chiefly as the necessary first step for Republicans to pass a rewrite of the tax code without Democratic support. The budget document will be debated in the Senate Budget Committee next week, with a floor vote expected later in October.

"This budget is especially important because it will allow us to get to work on our pro-growth, pro-family, pro-jobs tax reform plan," Senate Majority Leader Mitch McConnell (R., Ky.) said in a statement Friday.

GOP leaders hope to use a special process called reconciliation, tied to the budget, to pass tax legislation with just a simple majority. Most bills need 60 votes to clear procedural hurdles in the Senate, where Republicans hold 52 seats. Under reconciliation, Republicans could pass legislation with just 50 votes, with Vice President Mike Pence then providing a tiebreaker.

The new budget's most important component is that it instructs the Senate Finance and House Ways and Means committees to come up with a package of tax changes and rate cuts that can add up to $1.5 trillion to the federal budget deficit over 10 years. The budget tasks the tax-writing panels with delivering tax legislation by Nov. 13, though there is no penalty for failing to hit the deadline.

Democrats criticized Senate Republicans for being willing to add $1.5 trillion to the federal budget deficit to cut tax rates.

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"The Senate Republican budget is the clearest sign yet that Republicans are intent on pursuing a tax plan that would blow a huge hole in the deficit and stack up debt, leading to cuts in programs that middle-class Americans rely on," Senate Minority Leader Chuck Schumer (D., N.Y.) said in a statement Friday.

Congressional aides and budget analysts said Friday that the budget suggested GOP leaders were largely moving on after abandoning their effort to roll back the ACA this week when last-ditch legislation failed to secure sufficient GOP support.

While some Republicans had expressed interest in trying to tackle health-policy changes in the process tied to the fiscal 2018 budget, GOP leaders sought to separate the two issues in order to avoid imperiling the tax rewrite, already a monumental political challenge on its own. President Donald Trump and GOP leaders unveiled the framework of their tax plan on Wednesday that proposes sharply reducing tax rates on businesses and many individuals, but left many important details to be filled in later.

The Senate GOP budget doesn't deliver instructions to the chamber's health committee to produce legislation dismantling the 2010 health law, as it did in the previous budget resolution. But the latest budget doesn't entirely preclude Republicans from making policy changes tied to health care, since many taxes tied to the ACA fall under the purview of the two tax-writing panels.

"Obviously there is a rhetorical and strategic shift right now to focus on their plan to pass tax cuts," said Jacob Leibenluft, senior adviser at the Center on Budget and Policy Priorities. "Having said that, this instruction would still allow, it appears, a repeal of much of the ACA and cuts to other health programs that exist within Finance [committee]'s jurisdiction."

The Senate GOP budget also directs the chamber's Energy and Natural Resources Committee to come up with $1 billion in deficit reduction. One possibility might be opening up drilling in the now-protected Arctic National Wildlife Refuge. The panel's chair, Sen. Lisa Murkowski (R., Alaska) has been supportive of opening a non-wilderness portion of the refuge to development.

Republicans, and the Trump administration in particular, have been eager to find ways to raise money through offering more oil and gas leases on federal lands. But drilling in the Arctic refuge has long been opposed by environmental groups, which cite the value of its undisturbed lands.

House Republicans released their own fiscal 2018 budget in July, which was slightly different from the Senate's blueprint.

The House budget calls for a tax overhaul that doesn't add to the federal budget deficit, though it allows for it to be analyzed using rules that take into account expected economic growth, which the Senate budget doesn't for the tax plan. The House budget also called for $203 billion in miscellaneous deficit-reduction measures.

The House is expected to vote on its budget next week. Once the House and Senate have passed their own budget resolutions, they will have to agree on a compromise version, which will then have to pass both chambers.

Budget resolutions are nonbinding and only need a simple majority to pass each chamber. They are separate from the spending bills needed to fund the government, which require 60 votes to clear the Senate.

The government's current funding expires on Dec. 8 and lawmakers are expected to strike a bipartisan agreement over where to set its spending levels before then.

Tim Puko contributed to this article.

Write to Kristina Peterson at kristina.peterson@wsj.com and Richard Rubin at richard.rubin@wsj.com

(END) Dow Jones Newswires

September 29, 2017 16:38 ET (20:38 GMT)