Washington - Senate Majority Leader Mitch McConnell said that any tax overhaul can’t add to the growing US budget deficit, a position that places him at odds with President Donald Trump, who has called for a significant tax cut.
McConnell said in an interview Tuesday with Bloomberg News that the nation’s “alarming” debt requires an approach that would balance tax cuts with new sources of revenue to avoid changing overall government receipts.
“It will have to be revenue-neutral,” he said. “We have a $21 trillion debt.” In an interview with The Economist that was published last week, Trump said “it is OK” if tax legislation increases the deficit in the short term in order to “prime the pump” for economic growth.
The Kentucky Republican didn’t commit to completing tax legislation this year, but said he and other congressional leaders have begun regular meetings with Treasury Secretary Steven Mnuchin and Trump’s chief economic adviser, Gary Cohn, on potential legislation.
“I’m confident we can get it done,” he said. “I’m not going to put a deadline on it.” McConnell said the lack of Democratic support for a Republican tax package requires him to use budget rules that require revenue neutrality in exchange for pushing through permanent tax changes with only 50 votes. The GOP controls only 52 of the chamber’s 100 seats.
One potential revenue-raiser, a border-adjusted tax proposed by House Speaker Paul Ryan, faces a dim outlook in the Senate, McConnell said. “It’s a statement of the obvious that the prospects of that would be rather bleak,” he said.
Ryan has proposed to replace the existing corporate income tax with a 20 percent levy on US companies’ domestic sales and imports. Exports would be excluded. The proposal is estimated to raise more than $1 trillion over a decade. But it has drawn opposition from retailers, oil refiners and other industries that rely on imports.
Leaders of those businesses say the tax would raise consumer prices on basic items. The tax’s proponents argue that it would result in a strengthening dollar, evening out the tax’s effect on prices over time. But some economists question whether exchange rates would react predictably.
“The critics say it’s too risky, so you could blow up the economy in the process,” McConnell said. He declined to give his own view of the measure.
Meanwhile, McConnell said he’s taking part in ongoing meetings with Mnuchin, Cohn, Ryan and Republican leaders of tax-writing committees. They’re seeking to agree on a single approach to a tax overhaul before proceeding. An initial meeting took place a few weeks ago, he said.
“We thought that would be a good way to begin would be for us to reach some kind of agreement on what we’re for, rather than having a whole lot of different versions,” McConnell said.