US Senate passes budget blueprint key to Trump tax effort

The US Senate voted on Thursday (Oct 19) to approve a budget blueprint for the 2018 fiscal year that will pave the way for Republicans to pursue a tax-cut package without Democratic support. PHOTO: REUTERS

WASHINGTON (REUTERS) - President Donald Trump's drive to overhaul the US tax code cleared a critical hurdle on Thursday (Oct 19) when the Senate approved a budget blueprint for the 2018 fiscal year that will pave the way for Republicans to pursue a tax-cut package without Democratic support.

By a 51-to-49 vote, the Republican-controlled Senate approved the budget measure, which would add up to US$1.5 trillion (S$2.04 trillion) to the federal deficit over the next decade in order to pay for proposed tax cuts.

"Now with this budget, we're on a path to deliver much-needed relief to American individuals and families who have borne the burden of an unfair tax code," Senate Majority Leader Mitch McConnell said after it passed.

But Democrats are likely to oppose the Trump administration's tax plan, which promises to deliver up to US$6 trillion in tax cuts to businesses and individuals. "This is not a bad budget bill, it is a horrific budget bill," Senator Bernie Sanders, an independent who ran for the 2016 Democratic presidential nomination, said before the vote. "At a time of massive income inequality, this budget provides US$1.9 trillion in tax breaks for the top 1 per cent." The resolution has to be reconciled with a markedly different version passed by the House of Representatives, where Republicans say negotiations on a unified measure could take up to two weeks.

The House budget resolution calls for a revenue-neutral tax bill and would combine tax cuts in the same legislation as US$203 billion in spending cuts to mandatory programs including food assistance for the poor. The Senate version instructs the Energy and Natural Resources Committee to save at least US$1 billion over the next decade.

The Senate measure contains a legislative tool called reconciliation, which would enable Republicans, who control the 100-seat Senate by a 52-48 margin, to move tax legislation through the Senate on a simple majority vote. Otherwise, tax reform would need 60 votes and would likely fail.

After failing to approve Trump-backed legislation to overturn Obamacare, Senate Republicans are under intense pressure to succeed on tax reform, beginning with the budget measure, which would allow tax legislation to add up to US$1.5 trillion to the federal deficit over the next decade to pay for tax cuts.

Although Democratic votes will likely not be needed to pass tax legislation, President Donald Trump sought the support of six Senate Democrats for his plan at a Wednesday meeting with Finance Committee members from both parties.

Five of the six Democrats, whom the White House described as open to working with Trump on taxes, are up for reelection next year in states that Trump carried in the 2016 election.

The White House contends that the Republicans' plan to slash the corporate income tax rate to 20 per cent from 35 per cent would create jobs and boost wages for blue-collar workers.

But Senator Ron Wyden, the top Democrat on the tax-writing Finance Committee, who attended the White House meeting, said he made clear to Trump that Democrats believed his plan would benefit the wealthy, raise taxes on some middle-class Americans and increase the federal deficit.

Join ST's Telegram channel and get the latest breaking news delivered to you.