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Senate Majority Leader Mitch McConnell on Tuesday drew a line in the sand during that could set up a showdown between GOP leadership and President Donald Trump on taxes.
McConnell told Bloomberg TV that he did not think any tax-reform plan should increase the federal deficit, a principle that stands in contrast with Trump’s outline for reform.
“It will have to be revenue-neutral,” McConnell said of possible tax cuts, citing the country’s “$21 trillion debt” as the reason.
Treasury Secretary Steven Mnuchin told reporters after the release of the one-page Trump tax outline last month that the plan would pay for itself through increased economic growth. Trump told The Economist in an interview that the tax plan would most likely increase the deficit in the short term to “prime the pump” for more economic growth.
Most Republican leaders – including McConnell, House Speaker Paul Ryan, and House Ways and Mean Committee Chair Kevin Brady – favor a deficit-neutral tax plan.
Republicans consistently brought up concerns with the increasing federal debt under President Barack Obama, with the loudest cries coming from conservative members of Congress. Trump’s outline for deep tax cuts without corresponding adjustments to spending could therefore be a nonstarter for many GOP lawmakers.
With Democrats likely to be in universal opposition to the plan, Republicans in both chambers of Congress would have to be nearly unanimous in their support of any bill for it to pass.
McConnell also downplayed the possibility of including a border adjustment tax to any plan. The BAT is a controversial tax that would in theory favor exporters and penalize importers. It has been attacked by retailers and some Senate Republicans, which led McConnell to say the “prospects of that would be rather bleak.”
McConnell also told Bloomberg he had no deadline for tax legislation to be passed.