Tax reform failure

Tax reform failure will flip the House

Minority Leader Nancy Pelosi has no interest in playing ball with Republicans, putting her at odds with some of her members.

By HEATHER CAYGLE and AARON LORENZO

House Democrats have spent weeks publicly lambasting Republicans for trying to muscle through a partisan tax overhaul. But privately, Democratic leaders have no intention of engaging with Republicans even if they offered, sources close to them say.

House Minority Leader Nancy Pelosi (D-Calif.) is convinced another GOP crash-and-burn would likely hand Democrats the House next year, so there’s no political upside to playing ball.

“You will be in the majority” if Republicans continue to stumble, Pelosi said during a closed-door caucus meeting on Tuesday, according to sources in the room.

Democrats need to pick up 24 seats to take back the House and many Democratic challengers are already outraising Republican incumbents, putting the chamber in play. The tax reform fight is personal for Pelosi because it presents her best — and probably last — chance at reclaiming the speaker’s gavel.

But the strategy puts Democrats on the tax-writing Ways and Means Committee in an awkward spot — haranguing Republicans for refusing to work with them while their own leaders hope the GOP continues its party-line push.

Still, Republican outreach to Democrats on tax reform has been minimal, at best. Party leaders decided early on to pursue a partisan approach by employing reconciliation, the majority-vote mechanism in the Senate allowing them to sidestep Democratic filibusters.

Drew Hammill, a spokesman for Pelosi, said she and Ways and Means ranking member Richard Neal (D-Mass.) are in lockstep. They want to see the current Republican plan, which they decry as a tax cut for the wealthy, defeated. Once that happens, Democrats are happy to work with the GOP on a bipartisan tax code rewrite.

But more than a dozen Democratic members and aides interviewed for this story said they don’t see a scenario in which Democrats would offer Republicans a life preserver with the midterms months away and a real shot at taking back the House.

Still, Neal has waited more than two decades to become the top Democrat on the Ways and Means Committee and have a shot at rewriting the tax code. Sources close to the Democratic lawmaker say if the chance to cut a deal with Republicans presented itself, he would work on a bipartisan compromise, even if that means bucking his own leadership.

“This is a legacy issue for Neal,” a source said.

The window for compromise is small and likely wouldn’t come until next year. House Republicans will introduce their tax bill next week with hopes of approving it by Thanksgiving. GOP leaders have set the end of the year as their target for sending a bill to the president’s desk, an ambitious timeline.

Democrats are counting on internal GOP disagreements on divisive issues, such as whether to eliminate the deduction for state and local taxes, to slow any momentum Republicans currently have. If Republicans start 2018 without an agreement, Democrats are betting they will be desperate to compromise.

Several top Republicans have said their House and Senate majorities will be in peril if they fall short on tax reform and fail to repeal Obamacare.

Pelosi herself touched on the GOP's predicament during the caucus meeting.

“Their biggest argument in favor of their tax bill is, ‘Well, we won’t win next year’s election, unless we pass something,’” she said. “So we have to make sure this doesn’t happen."

But some Democrats say they see several potential areas for compromise. They include tax policies like expanding the child tax credit, a proposal championed by Ivanka Trump that’s expected to be included, in some form, in the Republican tax plan.

It’s part of a Republican push to make the overall plan seem more favorable to middle-class taxpayers and possibly draw some Democratic support.

Rep. Rosa DeLauro (D-Conn.), a Pelosi ally, brought up the child tax credit during a leadership meeting Monday night, suggesting ways Democrats might be able to work with Republicans on a bipartisan compromise.

But Pelosi shot down the idea and moved on, according to three sources who were present, saying the focus is on defeating Republicans. DeLauro later disputed that account, saying she’s in agreement — and has been — with Pelosi on tax reform.

“I was not making any other suggestion, other than saying [it’s a] bad bill,” DeLauro said in an interview. “If we have the opportunity to have a back-and-forth ... about what should go into a tax proposal, I will come at it from the child tax credit perspective.”

Supporters of expanding the child tax credit see it as a stumbling block because doubling the credit and making it refundable has a steep price tag. Democratic leaders know this, so they’re not likely to want to give Republicans any help, said one child tax credit advocate.

Child tax credit aside, there's a gulf between the parties over who would benefit from a tax code rewrite.

“If you start from the premise that the current tax code is anachronistic, then I think that we should be trying to figure out — Democrats and Republicans — how to do this, and it ought not tilt to the top,” said Neal, who also backs an expanded child tax credit.

He’s expressed frustration with the scant detail offered from Republicans about how middle- and lower-income taxpayers would be affected. The deficit is another big concern.

The GOP's tax push will be another test of Pelosi's grip on the Democratic Caucus. House Ways and Means Chairman Kevin Brady (R-Texas), a point person on the issue, has met with several moderate Democrats in recent weeks, and Republican leaders hoping to pick up some minority member votes on the House floor.

Pelosi is known for her ability to keep her caucus united and was able to lean on those skills during the Obamacare repeal debate. She discouraged Democrats from introducing health care alternatives to keep the spotlight on Republican stumbles.

But the politics of tax reform are different. GOP lawmakers believe their bill benefits Democratic constituencies just as much as Republican divisions.

Republicans are daring Democrats to go against their leadership because the economics will be hard for them to ignore, said Rep. Mike Bishop (R-Mich.), who nonetheless acknowledged Pelosi’s “stranglehold” on her caucus.

But Democrats argue that Republicans will pay a price for their partisan tax push if it fails.

“To my Republican colleagues, you will reap what you sow in tax reform,” said Rep. Linda Sánchez (D-Calif.), a member of leadership who sits on the Ways and Means panel.