Senate: Preserve corporate tax cuts, not individual rates
WASHINGTON — A gambit by Senate Republicans to make a large corporate tax cut permanent by having benefits for individuals expire at the end of 2025 created new problems for the legislation Wednesday as lawmakers were still grappling with the controversial decision to add the repeal of a key Obamacare provision.
The decision by Republican leaders to double-down on risky maneuvers to overcome budgetary hurdles with their tax overhaul threatened to put the entire effort in jeopardy.
Sen. Ron Johnson, R-Wis., declared he would not support the bill because it treats large corporations differently than many small businesses, which pay taxes through the individual code.
“If they can pass it without me, let them,” Johnson told The Wall Street Journal. “I’m not going to
vote for this tax package.”
He later said he hoped “to address the disparity so I can support the final version.”
At the same time, Sen. Susan Collins, R-Maine, raised concerns about the bill’s repeal of the individual mandate under the Affordable Care Act that requires all Americans to have health insurance.
“It greatly complicates our efforts to combine tax reform and changes in the ACA,” said Collins, who was among three Republican senators who voted this year against the party’s attempts to repeal the entire Affordable Care Act.
On top of that, Republican deficit hawks are withholding support until they are convinced the economic growth assumptions are realistic and the tax cuts would not add more than $1.5 trillion to the deficit during the next decade.
“I’m not a yes, not a no,” said Sen. Bob Corker, RTenn. “I’m in a watch-andsee, trying to ensure we’re not going to do anything to exacerbate our deficit issues.”
Senate Republican leaders made the major changes to the bill late Tuesday night as they raced to try to pass a tax overhaul by the end of the year.
The move to effectively repeal, starting in 2019, the individual mandate under the Affordable Care Act, would save an estimated $318 billion over 10 years. That provided additional revenue to make the tax plan more attractive to middle-class Americans, at least initially.
The bill would lower certain individual tax brackets from the 22.5 percent, 25 percent and 32.5 percent proposed last week, to 22 percent, 24 percent and 32 percent.
The revised plan also would increase the current child tax credit from $1,000 to $2,000. The original Senate plan proposed raising it to $1,650.
“Ultimately, I’m more than willing to defend the decision to end the individual mandate taxes,” Senate Finance Committee Chairman Orrin Hatch, R-Utah, who drafted the revisions, said Wednesday at the start of a hearing on the new bill.
“It’s the right thing to do. Far more people will be better off as a result.”
But those changes, as well as reforms to help lower costs for so-called pass-through businesses that pay taxes through the individual code, would expire in eight years to avoid adding to the deficit.
The National Federation of Independent Business said it supported the revised Senate bill. But spokesman Jack Mozloom said members don’t like that those provisions expire in 2025.
He also said the group was optimistic that those cuts would be extended in the future. “If the tax reform has the effect that everyone expects, which is to lift the economy and ignite growth, it’s going to be awfully hard eight years from now to let that expire,” he said.
The revisions sparked outrage from Democrats. “This bill seems to get worse by the hour,” Sen. Ron Wyden, D-Ore., said at Wednesday’s hearing.
“For multinational corporations, their handouts are set in stone, written in ink, locked in place with the key thrown away. But not for the middle class,” he said. Wyden noted that the individual tax cuts don’t even last a full decade.
He also pointed out that the Congressional Budget Office has predicted that repealing the health insurance individual mandate would cause an average increase in premiums of about 10 percent a year.
“For middle-class families, premium increases are the same thing as tax increases,” Wyden said.
All the changes in the bill related to individual tax cuts would disappear after 2025, including the proposed doubling of the standard deduction.
That means the state and local tax deductions, which the original Senate bill eliminated permanently, would return in 2026.
State tax deductions, including property-tax deductions, are mostly used in California, New York and other high-tax states that are Democratic strongholds.
To ease concerns of Republicans in some of those states, the House bill eliminates the deduction for state and local income and sales taxes, but keeps it for property taxes up to $10,000.
Although the state and local deduction would not be permanently eliminated by the revised Senate bill, that might not satisfy House Republicans who worked hard to forge the compromise to keep the propertytax deduction.
House Ways and Means Committee Chairman Kevin Brady, R-Texas, has vowed to preserve the property-tax deal as the bills are merged into a final product.
“Not ‘try,’ ” Brady said in an interview Wednesday. “I made a commitment that the final bill will include the property-tax [provision] as the House has it.”
President Donald Trump was set to meet today with House Republicans as they prepare to vote on their bill.
Expiration of the individual tax breaks was done to allow Senate Republicans to address the complicated math they face.
Because the Senate is planning to use a special budget reconciliation process to pass the tax bill, the proposal must not increase the deficit after 10 years.