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August 7, 2017

Republican leaders look ahead to a tax reform battle this fall

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  • Health care reform has occupied the spotlight on Capitol Hill in recent months, but an equally contentious issue is on the Republican agenda next: tax reform. A team of six Republican leaders has already developed some broad policy goals.
  • The proposed plan would lower tax rates for individuals and businesses and simplify the tax codes with fewer brackets and fewer deductions. In addition, the White House would like to lower the business rate from 35 percent to 15 percent. However, they want the reform to be revenue-neutral, meaning it will not raise the deficit. Republican leaders were intending on using the nearly $1 trillion saved from health care reform to fund tax cuts. However, health care reform didn’t pass.
  • Republicans face an extremely ambitious calendar if they wish to pass tax reform by the end of 2017. They hope that the House of Representatives can pass a tax reform bill in September and hand it to the Senate, which would pass its bill in October or November. However, at the end of September, they must pass a debt ceiling increase to avoid a government shutdown.
  • Democrats have indicated willingness to work with Republicans, but there are several areas of disagreement that could prove problematic. Democrats oppose tax cuts for the wealthy and cuts to Medicare and Social Security as part of tax reform. Since Republicans didn’t get the income they expected from health care reform, they have considered cuts to Medicare and Social Security as an option to pay for tax cuts.

  1. Essential question: What challenges do Republicans face as they attempt to pass their agenda?
  2. How does the fact that Republicans failed to pass health care reform affect their ability to pass tax reform?
  3. What is the value of bipartisan cooperation in major legislation such as health care reform and tax reform? How do you think the tax bill might change from the Republicans’ stated early goals if Democrats are an active part of the process?

Key Terms:

tax brackets: a range of incomes taxed at a certain rate. The American tax system is similar to a staircase. Tax rates jump up marginally for incomes beyond certain cutoff points.

deduction: a reduction of taxable income

debt ceiling: an upper limit set on the amount of money that a government may borrow

Extension activity:

Take a look at how lawmakers balance the federal budget using this PBS NewHour Lesson Plan: How to create a balanced budget — it’s a ‘Balancing Act.’ Give students a say in how money is spent with the interactive tool Balancing Act. What changes will they make?

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