Trump's tax cut dreams hit Republican resistance

President Donald Trump's demands for the next coronavirus aid package are running into a stubborn obstacle: his own party.

Asked what he thought of a payroll tax cut, the subject of Trump's ultimatum for any new bill, Sen. Chuck Grassley didn't hesitate.

"Right now, not much," the Senate Finance Committee chairman said, worrying that the tax cut could drain retirement funds or leave older Americans with the view that Congress doesn't take "seriously" the plight of the Social Security Trust Fund.

"I'm going to give it due consideration, if I can see a strong group of people who think it's the right thing to do," added Grassley (R-Iowa), whose committee handles federal tax policy. But he said the president's preference wouldn't be the last word - a sentiment shared by many in the Senate GOP: "The president proposes, we dispose."

As Washington begins zeroing in on its next major coronavirus bill, congressional Republicans are on a different trajectory than the president and are themselves divided on the payroll tax cut, or whether to do anything at all. Much of the party has coalesced behind providing liability protections that Democrats disdain, yet Trump is eyeing the much flashier tax cut as the centerpiece of the upcoming legislation. Meanwhile, House Democrats are moving ahead with their own big relief bill that Republicans are certain to reject.

A divided GOP combined with a partisan House Democratic plan and a president with his own goals is a formula for deeply complicated negotiations and an uncertain outlook, even as millions are losing their jobs and the Paycheck Protection Program threatens to run out of money for the second time since its inception.

Republicans are taking it slow on the next round of talks, but they've already made a clear ask of their Democratic counterparts: Senate Majority Leader Mitch McConnell has spent the past week touting his insistence that new legislation relax liabilities for businesses and employees that get back to work amid the pandemic.

It seems highly unlikely Republicans can draw red lines on both McConnell's liability protections and the president's payroll tax cut in exchange for reaching an agreement with Democrats to provide billions more to ailing state and local governments.

"They've got to get their act together," said Senate Minority Leader Chuck Schumer (D-N.Y.).

While there's plenty of GOP support for the liability provisions, the president's beloved tax cut is another story. Republicans are not universally in favor of it. And McConnell hates dividing his conference because it weakens his negotiating hand.

When asked about Trump's demand on payroll taxes on Tuesday, McConnell said "if there's any red line, it's on litigation." And in interviews with a series of Republicans on Tuesday it was clear why McConnell was focusing on the liability angle rather than the payroll tax cut.

Sen. John Thune of South Dakota (R-S.D.), McConnell's top deputy, said that protecting employers and employees from lawsuits is "straightforward." But when asked about the payroll tax cut, he replied: "I'm not a particular fan of that."

"I guess I'm open to being persuaded that it's something that could be effective. But I think some of the things we're currently doing are having a bigger impact," he said, listing aid programs for small businesses and direct payments to the public. "The payroll tax cut only helps if you're on the payroll."

Congress in March deferred employers' payroll taxes for the year. But Trump has been explicit that more needs to be done for workers.

"We're not doing anything without a payroll tax cut," Trump told Fox News over the weekend. On Tuesday, he re-upped that demand, adding in that he wants to eliminate sanctuary cities for undocumented immigrants and "perhaps" cutting capital gains taxes as well.

A White House official said the president is "passionate" about the idea of a payroll tax cut as one that gives workers more buying power and helps businesses more easily staff up moving forward. After failing to secure it in previous aid bills, Trump may be even more determined this time around.