Trump's tax reform overhaul: Senate approves budget plan, what happens next?

By Taxes FOXBusiness

The Capitol is seen in Washington, Friday, April 7, 2017. President Donald Trump is approaching the end of his first 100 days in office without having signed a single major bill into law. Political polarization in both parties in Congress has turned ... out to be a major obstacle for the president as well as lawmakers. (AP Photo/J. Scott Applewhite)

A fiscal year 2018 budget blueprint passed the Senate late Thursday, bringing the Republican Party one step closer to its goal of passing tax reform by year’s end.

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However, the GOP still has a myriad of challenges and variables to overcome in its journey to implement comprehensive tax reform.

Here’s where the effort stands now, with the budget nearly completed.

Budget and tax reform

The budget is a critical piece of the tax reform puzzle because it provides both a revenue line and a reconciliation mandate for the tax reform package.

The new Senate measure allows for $1.5 trillion over 10 years in debt-financed tax cuts.

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Additionally it permits Republicans to pass the package using the fast-track process known as reconciliation, which would forbid a filibuster from Democrats and sanction approval with only a simple majority of votes.

The two chambers still need to agree on a final budget resolution between their two different versions of the measure. The House blueprint calls for revenue neutral tax reform.

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Timeline

The GOP still aims to have the legislation completed by the end of the year, with House Speaker Paul Ryan (R-Wis.) saying last week that he would keep lawmakers working through Christmas to complete tax reform, if necessary. Once the final budget resolution is passed, the House Ways and Means Committee can introduce the tax reform legislation into the chamber, where it will be up for debate and votes. Multiple House sources speculated to Fox News on Thursday night that House Republicans may try to advance the package before Thanksgiving.

Ryan said he expects the GOP to move the bill over to the Senate sometime in November.

Unanswered Questions

While the overall themes of the tax reform package have been outlined by White House officials and GOP lawmakers, the fine details have yet to be ironed out. There is still disagreement among the GOP about whether to eliminate state and local tax (SALT) deductions, which would hurt higher-income earners in highly taxed states like California, New York and Connecticut. The White House has come out in favor of removing SALT deductions, however lawmakers from both sides of the aisle in the affected states are staunchly opposed.

The GOP has also yet to decide on exactly what income levels would correspond to the three tax brackets laid out by the party of 12%, 25% and 35%. The Republican Party has also floated the possibility of a fourth bracket, or a surtax, on the highest-earning Americans, which has also yet to be detailed. On Friday morning, Speaker Ryan said this would in fact be included in the framework, but he declined to reveal the rate.

Variables

The GOP is worried about a few wildcard variables that could impact the advancement of its tax reform package, including the health of some lawmakers in the party. Sen. John McCain (R-Ariz) and Sen. Thad Cochran (R-Miss.) have been suffering from health issues throughout recent months. Additionally, the Alabama special election on Dec. 12, for Sen. Luther Strange’s seat, could tip the balance in the chamber. A recent Fox poll showed the Republican candidate Roy Moore and his Democratic opponent Doug Jones, are tied.

The GOP currently holds 52 seats in the Senate. Sen. Rand Paul (R-Ky.) voted against the budget measure, but has said, so long as the tax reform package is consistent with the president’s promise of not increasing taxes on middle-income earners, he “cannot see [himself] not” voting in favor of it.

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