Republicans divided on how to pay for Trump’s tax cuts

President Donald Trump’s agenda is hitting speed bumps on Capitol Hill, as Republican infighting over spending levels threatens to halt a massive package of tax cuts, energy policy, healthcare and border security funds.

Speaker Mike Johnson, R-La., initially said his conference would take the first steps this week to move the bill. But as the week progressed, Republican lawmakers realized they would miss that deadline, as fiscal hawks said they could not support the massive package without more spending cuts.

“We’re stuck in the mud,” Rep. Bryon Donalds, R-Fla., told CNBC as he left a meeting of House Republicans on Wednesday. “There’s a lot of, what do they call it, paralysis of analysis? And I think at this point, we need to just make a clear decision.”

The upcoming effort to pass Trump’s legislative agenda offers Republicans, who control the House, Senate and the White House, their first opportunity to show voters how serious they are about cutting spending and reducing the national debt.

House GOP leaders initially proposed cutting several hundred billion dollars over a 10-year period by making changes to Medicaid, adding work requirements for able bodied adults with no dependents.  

But that was not enough for many of the conference’s fiscal hawks, who want to see upwards of $2 trillion in cuts.

The more cuts Republican leaders agree to make to a top line number at this early stage, however, the less money they will have to work with later on, when it’s time to decide which priorities to fund.

For example, Trump has promised to eliminate income taxes on tipped wages. But he has not said how he would make up for that lost revenue in the federal budget.

Trump has also pledged to raise the limit on how much taxpayers can deduct from their federal taxable income to reflect state and local taxes, or SALT, they already paid. This, too, would mean less money for the Treasury every year.

One idea for lowering the overall cost of the tax cuts is by shortening the number of years they would be extended, from 10 years down to around five.

But hardline conservatives are pushing for any tax cut package to pay for itself, and be either deficit neutral or even begin to reduce the national debt.

“It’s gotta be more than neutral,” Rep. Ralph Norman, R-S.C., told reporters Tuesday “You gotta put money in the bank.”

House Budget Committee chair Rep. Jodey Arrington, R-Texas, said the conference was making progress toward getting an agreement on spending by the end of this week, noting there were many moving parts between energy, border security, immigration, taxes, healthcare, military funding and student loans.

“All those pieces are coming together in a very balanced way,” Arrington told reporters. “The give and take is there, you know. Nobody’s going to get everything they want.”

House Democrats are expected to uniformly oppose whatever package the Republican majority puts on the floor. So the only real negotiations are within the GOP, not between Republicans and Democrats.

And with a margin of error of only a few votes, House Republicans will need to be united behind the final bill.

Even so, it became clear Wednesday that time was running out for House Republicans to take the lead over Senate Republicans on moving Trump’s agenda forward.

Sen. Lindsay Graham, R-S.C., who chairs the Senate panel on the budget, said Wednesday that his committee plans to take the first steps next week on a streamlined bill that would address border security, but not tax cuts.

“I’ve always believed that one big, beautiful bill is too complicated,” Graham told NBC News. “What unites Republicans, for sure, is border security and more money for the military. It’s important we put points on the board.”

Under the Senate’s preferred timeline, tax cuts would be hashed out later in the year.

Johnson quickly rejected Graham’s Senate-first plan, however, saying the upper chamber needs to give the House time to work through its occasionally messy process.

“He has to understand the reality of the House,” Johnson said of Graham, calling the senator “a good friend.”

“It’s a very different chamber with very different dynamics. And the House needs to lead this if we’re going to have success,” Johnson told reporters in the Capitol Wednesday.