Momentum builds for tax overhaul
Sens. Rubio and Corker back modified overhaul ahead of next week’s vote.
Two key Senate Republican holdouts back a modified version of the plan ahead of next week’s expected vote.
WASHINGTON — Key holdouts on the GOP tax bill fell in line Friday, boosting momentum for passage as Republicans released the final version of their tax overhaul ahead of next week’s expected vote.
Leaders won over Sen. Bob Corker (R-Tenn.), who had been the Senate’s lone GOP opponent of the $1.5-trillion package because he feared it would add too much to the deficit.
And negotiators satisfied Sen. Marco Rubio (R-Fla.) by slightly expanding a child tax credit to help workingclass families.
The new support makes passage of President Trump’s top year-end priority, which was in jeopardy amid prolonged GOP infighting, more likely. Voting could begin Tuesday.
“Every bill we consider is imperfect and the question becomes is our country better off with or without this piece of legislation,” Corker said in a statement. “I think we are better off with it.”
It did not appear that Corker demanded changes, as others have, before giving his backing. Rubio had threatened to vote against the measure on Thursday unless the child tax credit provision was enhanced, but his office said he would now support it.
White House Press Secretary Sarah Huckabee Sanders said Trump “greatly appreciates” support from Corker, who called the president.
The final version of the Tax Cuts and Jobs Act includes several compromises that forced Republicans to scale back on aspirations to vastly lower individual rates and create a simpler code that would allow Americans to file returns on a postcard.
The bill lowers corporate rates from 35% to 21%. It drops rates for many individuals, too, but those cuts are set to expire in 2025.
The new top individual rate, 37%, kicks in at annual income levels of around $500,000 for individuals and $600,000 for couples, slightly above today’s $470,000 threshold for the top 39.6% rate. But that income level is far from the $1-million cutoff once envisioned by Republicans, who face criticism that the bill favors the wealthy and corporations.
The bill keeps seven individual brackets, but with revised rates and income levels that Republicans say should result in lower taxes for many Americans. But several studies have found those savings would fade out over time, particularly after the individual rates expire.
“Americans deserve a new tax code for a new era of American prosperity,” said Rep. Kevin Brady (RTexas), chairman of the House Ways and Means Committee. But he acknowledged that the postcard Republicans once promised would replace complicated tax forms has “a few more items on it.”
The package, drafted without Democrats, fundamentally changes the tax code by repealing many popular deductions, including capping the state and local tax write-off at $10,000 and limiting mortgage interest deductions to loans of up to $750,000. Those changes are likely to hit hardest in California and other highcost states, where property and state income tax deductions are widely used.
It doubles the standard individual deduction to $24,000 for couples, but also does away with the $4,050per-person personal exemption used by many Americans to lower their tax bills.
The bill retains the estate tax on the wealthy — something that Republicans have long wanted to kill. But it will double the exemption to $22 million. It also repeals the so-called alternative minimum tax for businesses, but retains it for individuals with a higher income threshold.
On the business side, negotiators Friday pushed the corporate repatriation rate to 15.5% on firms that bring overseas profits back to the U.S. — higher than the 10% rate once envisioned or the 14% in an earlier compromise — as they searched for additional revenue to cover the costs of other changes.
Final negotiations also abandoned several highprofile GOP provisions that ran into steep resistance. Among those not included in the final bill is the proposed taxation of in-kind tuition payments for graduate students and the proposed repeal of deductions for private activity bonds used by municipalities to finance public projects. Deductions for student loan interest, also once targeted for elimination, were preserved.
The package keeps in place a decades-old tax rule Republicans had wanted to repeal, the so-called Johnson amendment, which limits the ability of churches and nonprofits to engage in political activity.
“Under this bill the working class, middle class and upper-middle class get skewered while the rich and wealthy corporations make out like bandits,” said Senate Minority Leader Charles E. Schumer (D-N.Y.). “It is just the opposite of what America needs.”
Winning back support from Rubio and Corker was crucial, as Republicans can lose no more than two votes for passage in the Senate, where they have a narrow 5248 majority.
Other potential GOP holdouts have not yet announced their votes but are expected to support the bill. Sen. John McCain (R-Ariz.) has been absent for cancer treatment, though others said he and Sen. Thad Cochran (R-Miss.), who is recuperating from outpatient treatment, are expected to vote. Vice President Mike Pence will be on hand in case he is needed to break a tie.
Negotiators met Friday morning to finish the bill, and said they were optimistic they had the votes for passage in the House and Senate, meeting Trump’s push for completion by Christmas.
“I’m confident both chambers will pass it next week,” said Sen. Patrick J. Toomey (R-Pa.).
Rubio’s office confirmed his support. “For far too long, Washington has ignored and left behind the American working class,” Rubio tweeted, calling the changes “a solid step toward broader reforms.”
The changes increase the refundability of the child tax credit, which Rubio and Sen. Mike Lee (R-Utah) were able to boost from $1,000 to $2,000 per dependent — so $1,400 will be refunded to working-class Americans if they don’t owe beyond their payroll taxes. Earlier, just $1,100 would have been refunded.
Critics say the bill still leans too heavily in favor of corporations and the wealthy without much improvement for middle-class Americans.
It allows a new 20% deduction on the first $315,000 of income for so-called passthrough businesses, including mom-and-pop shops but also bigger firms that organize as sole proprietors, as Trump does.
It also includes a provision to open part of the Arctic National Wildlife Refuge to oil and gas drilling, a priority for Sen. Lisa Murkowski (R-Alaska).
And it would repeal in 2019 the requirement under the Affordable Care Act that all Americans have health insurance.
Deductions for medical expenses — eliminated in earlier versions — will be preserved, but with limitations.
Despite polling showing the bill is unpopular among Americans, Republicans remained confident it will gain support once the cuts are implemented.