Here's Democrats' plan on tax reform this fall

Why tax reform is so hard
Why tax reform is so hard

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  • Democrats outlined their tax principles in an August 1 letter to Republican leaders
  • But Republicans don't seem to feel the pressure to meet Democratic demands

(CNN)Over the recess, Democrats are gearing up for another partisan battle in Congress. This time it's on tax reform.

After crashing and burning on health care last month, Senate Republicans and the White House are desperate for a legislative victory and Democrats are feeling emboldened that they may have more leverage in the upcoming fight. This month, Senate Minority Leader Chuck Schumer is continuing conversations with his members on how they will message tax reform, but the key takeaway for now is that Democrats won't flatly agree to go along with a Republican bill that benefits the top 1% of earners.
"Donald Trump campaigned as a populist, for God's sake. It's a different world than it was 10 or 15 years ago. The idea that people will support huge tax cuts for the rich when they're given a crumb won't work anymore," Schumer told CNN.
    Democrats outlined their principles in an August 1 letter to Republican leaders and the White House. If Republicans want help in their effort to overhaul the tax code or give tax cuts to the American people, 45 Democrats signed a letter stating that Republicans had to work through regular order, could not raise taxes on the middle class or cut taxes for the one percent and their reforms couldn't increase the deficit.
    But Republicans don't seem to feel the pressure to meet Democratic demands.
    After Democrats sent that letter, Senate Majority Leader Mitch McConnell announced he would use reconciliation to overhaul the tax system, a process that only requires 51 votes -- as opposed to the usual 60 -- and gives McConnell the option of passing tax cuts without a single Democratic vote.
    "We will need to use reconciliation because we have been informed by a majority of the Democrats in a letter I just received today that most of the principles that would get the country growing again, they're not interested in addressing," McConnell said earlier this month. "I don't think this is going to be 1986 when you had a bipartisan effort to scrub the code. Maybe there will be a few. There were several Democratic senators who did not sign the letter that may be open to pro-growth tax reform."
    So far, it appears Republicans, who hold 52 seats in the chamber, are prepared to go it alone on tax reform. The so-called "big six" a group of Senate, House and White House stakeholders are all Republicans. And while Republicans would certainly welcome any Democratic support they could find from red state Democrats up in 2018, under reconciliation it's not necessary they have them.
    In an interview with CNN Wednesday afternoon, Schumer said he still hoped McConnell would rethink using reconciliation.
    "I think when they look at it, they are going to see how hard it is to do," Schumer said adding that he thinks rank-and-file Republican members are more interested in a bipartisan approach.
    If Republicans use reconciliation, Schumer says it means that "any two or three Republicans can bring this down" just like health care.
    Behind the scenes, Democrats are dubious that Republicans are as close as they claim to be on tax reform.
    Many point out that without health care, Republicans have less money to finance tax cuts. And, Republicans are still fighting about their budget -- the vehicle the GOP would need to pass if they are going to use reconciliation in the first place.
    "Congressional Republicans are at war with themselves, so color me skeptical they can all get together on a massive undertaking like this," a Senate Democratic aide told CNN.
    Before the recess, the "big six" -- after working for several months -- released a five-paragraph statement of principles on how their tax reform proposal would look, but it was devoid of the kind of details necessary to finalize a bill. And, there are still many questions about what tax reform proposals could pass the Byrd Rule, the arcane set of rules that dictate what can be included in a reconciliation bill.
    But Democrats face challenges themselves when it comes to Republican efforts to reform the tax code.
    Unlike the health care debate where Democrats could clearly point to millions of Americans who stood to lose insurance under the Republicans' repeal of Obamacare, even some Democrats acknowledge it's harder to campaign against tax cuts.
    "It's a bit harder to explain if you vote for this, rich people get a tax break and middle class people don't get anything out of it. That's just harder to explain," said one Democratic aide. "It will be harder to sit there and just spout out one or two lines that makes it easy to understand."
    And Republicans are keenly aware that their messaging must be about how tax reform is good for all Americans, not just the rich.
    American Action Network's Middle-Class Growth Initiative announced this week that it would spend $2.5 million on ads in districts across the country that would focus on how tax reform would benefit working-class Americans.
    "There is a great focus on the middle class portion of this. That is an important part of providing the political momentum," said Kevin Madden, a strategist who is working with stakeholders to develop the GOP message on tax reform.
    Former Indiana Gov. Evan Bayh, a Democrat, told CNN that his advice -- especially for members of his party running in red states in 2018 -- is to try to find some way to work with Republicans.
    "There is an intersection here between good policy and good politics for Democrats. Just standing uniformly against any kind of tax cuts is politically very damaging," Bayh told CNN. "My advice: Democrats need to be for tax cuts, but the right kind of tax cuts. Ones targeted at the middle class and ones that are fiscally responsible."