Senate Bill Hits Obstacle Over Deficit Concern
Posted by
spamlet
Nov 30 '17, 16:33
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FWIW, this is work me's literal walking up sweating nightmare in all this.
WASHINGTON—Senate Republicans hit a significant stumbling block late Thursday in their efforts to overhaul the tax code, forcing them to contemplate rewriting key parts of their $1.4 trillion tax-cut plan.
One likely outcome is that the corporate tax rate won’t remain at 20% as Republicans and President Donald Trump have wanted. Instead, it would start at 20% and then in later years, the rate would rise in stair-step increments. That would shrink the size of the tax bill.
The problem came after Republicans failed to come up with a way to placate a few members concerned about budget deficits.
Talks were ongoing with Sens. Bob Corker (R., Tenn.) and Jeff Flake (R., Ariz.), deficit hawks who hadn’t committed to voting for the package even after a closed-door lunch attended by Senate GOP leaders.
Sens. Susan Collins (R., Maine), Steve Daines (R., Mont.) and Ron Johnson (R., Wis.) also still hadn’t promised their supportbecause of other concerns.
One wild card, Sen. John McCain (R., Ariz.) said Thursday he would get behind the bill, providing some momentum toward passage.
Republicans need 50 votes, with Vice President Mike Pence breaking a possible tie. The party controls 52 seats, and no Democrat is expected to vote for the bill, which means Republicans can afford to lose only two votes.
The Joint Committee on Taxation said late Thursday that the Senate plan wouldn’t meet the party’s goal of paying itself through stronger economic growth, fueling the concerns of the deficit hawks.
The bill would generate $458 billion in revenue from economic growth and add an extra $51 billion over a decade in interest payments, leaving the net cost of the bill at about $1 trillion over a decade, the analysis found.
Mr. Corker “latched onto” that report, Sen. John Cornyn (R., Texas) said.
“The problem,” Mr. Corker said from the Senate floor during a tense delay on a vote that the holdout Republicans could have used to send the bill back to the Senate Finance Committee, “one trillion off.”
Republicans want to include a “trigger” in the bill that would increase taxes automatically if revenue undershoots expectations, as the new analysis forecasts would happen. But that trigger approach appeared to run afoul of parliamentary rules on Thursday.
“It doesn’t look like the trigger’s going to work,” Mr. Cornyn said after the Senate was transfixed by the sight of the entire Republican leadership negotiating in the open on the Senate floor with Messrs. Corker and Flake.
Without the trigger, Republicans found themselves scrambling to find new ways to meet the demands of deficit hawks.
Even as GOP leaders negotiate with Messrs. Corker and Flake to establish such a trigger, Republicans will soon turn to rapid-fire amendment votes on the Senate floor. Any senator can get a vote on any amendment. Republicans have filed amendments to expand charitable deductions, repeal the estate tax and change the tax rules for marijuana. They are constrained by their decision to limit the amount of tax cuts to $1.5 trillion over 10 years.
The core of the fast-moving GOP tax bill is a permanent corporate tax cut combined with tax reductions for individuals and pass-through businesses such as partnerships that expire after 2025. The bill would also repeal the mandate for individuals to have health insurance and allow drilling in the Arctic National Wildlife Refuge. Republicans say it will boost economic growth, though official estimates of the growth effects from the nonpartisan Joint Committee on Taxation haven’t been released and the Treasury Department hasn’t released a detailed analysis either.
If the bill passes the Senate, Republicans must reach a House-Senate compromise, likely through a conference committee composed of lawmakers from both chambers. The House and Senate would each then have to vote again. An alternative would be for the House to vote up or down on the Senate bill, but House leaders have insisted that they won’t do that.The Dow Jones Industrial Average powered past 24000 for the first time Thursday. Shares of financial firms led the blue-chip index higher, as investors and analysts said they were closely following Republicans’ progress on the tax overhaul plan. Banks are among the stocks that would benefit from the plan’s proposed corporate tax cut since they tend to pay a relatively high tax rate, analysts said. Goldman Sachs led the Dow industrials higher, contributing about 56 points to the index’s gain.
Republicans are still trying to figure out how they could address Mr. Corker’s concerns about budget deficits. They are attempting to design a “trigger” that would increase taxes automatically if the economy doesn’t pick up and revenue undershoots expectations. Mr. Corker said Wednesday that lawmakers were having “difficulties” crafting a trigger; some Republicans are averse to any proposal that could reverse tax cuts down the road.
A focal point for Republicans will be an amendment to make child tax credits more generous.
The current Senate bill doubles an existing tax credit to $2,000 per child, which helps offset the loss of other tax breaks. Sens. Marco Rubio (R., Fla.) and Mike Lee (R., Utah) are proposing expanding the child tax credit to more low-income families. They want to pay for the measure with a 22% corporate tax rate, higher than the 20% rate pushed by President Donald Trump.
Messrs. Rubio and Lee say the party needs to focus more on families and mitigate the cost of raising children. The pro-business wing of the party says the 20% corporate tax rate is crucial to the bill. Groups such as Americans for Tax Reform, led by antitax activist Grover Norquist, were rallying conservatives against the amendment.
“I don’t think it would pass,” said Sen. Richard Burr (R., N.C.), saying he saw no reason to move from a 20% corporate-tax rate.
“I don’t have a problem necessarily with 20%, but 22% would generate just as much growth,” Mr. Rubio said.
Ms. Collins, a Republican who is a crucial swing senator, indicated Thursday morning that her support for the bill would depend on passage of an amendment she has offered to include a deduction for property taxes up to $10,000, as well as an agreement she struck with GOP leaders to separately pass two health-care bills designed to stabilize the individual insurance market.
Those bills are aimed at offsetting the impact of repealing the individual mandate in the Affordable Care Act, which says that most people must have health-care insurance or pay a penalty. Republicans added the mandate repeal to the tax bill because it reduces federal health-care spending and thus frees up money for deeper tax cuts.
“It would be very difficult for me to support the bill if I do not prevail on those two issues,” Ms. Collins said Thursday morning at a breakfast hosted by the Christian Science Monitor. “The reason I’m more optimistic is the extensive discussion I’ve had with Senate leaders.”
Ms. Collins also wants to lower a threshold for deducting the cost of medical expenses to 7.5% of income. The Affordable Care Act set a higher bar, limiting the medical-expense deduction to amounts that exceed 10% of income. The details of her amendment are still taking shape, but at a minimum the changes would apply to senior citizens starting next year.
Ms. Collins said she couldn’t give a firm position on the tax bill until she sees the outcome of the long series of amendment votes that will lead up to the final passage vote.
“I need to wait to see what happens, but I am encouraged by the receptivity to the proposals I’m putting forth,” she said.
Ms. Collins said she supported the amendment from Messrs. Rubio and Lee. With those three votes and support from Democrats, that proposal could pass. But Democrats have been circumspect about their votes on the amendment and whether they would do anything to improve a bill they intend to campaign against as fiscally irresponsible and hurtful to middle- and low-income households.
Ms. Collins said she planned to offer a slightly different amendment that would pay for expanding the tax credit for child and dependent care by changing the tax treatment for carried interest. Carried interest is the profit that some investment managers, such as at hedge funds, typically get. It is taxed at preferential long-term capital-gains rates, now 23.8%, compared with the current top ordinary income rate of 39.6%.
“I talked to the president about that and he had said he had no problem with closing the carried-interest loophole,” Ms. Collins said.
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