Senate OKs GOP tax bill
Legislation passes with no Democratic support
WASHINGTON — Securing a desperately sought legislative victory for the Trump presidency, the Senate approved a $1.5 trillion tax overhaul Saturday morning that provides massive tax cuts to large corporations and wealthy individuals but could lead to higher tax bills for millions of Californians.
Passage, by a 51-49 vote with no Democratic support, was assured after Republicans rewrote parts of the bill in the final hours to lure GOP holdouts such as Sen. Susan Collins, R-Maine, who was won over when Senate leaders agreed to allow a $10,000 deduction for property taxes.
That concession will ease the loss of the state and local tax deductions written into the bill, but is of less use in California, where the Proposition 13 ballot measure has reduced the growth of property taxes in the state, but state income taxes are the highest in the nation.
Sen. Kamala Harris, D-Calif., said California would face the biggest tax increase of any state in the nation. She and other Democrats pointed to a state-by-state analysis by the leftleaning Institute on Taxation and Economic Policy that showed the top 1 percent of Californians would receive an average $14,370 tax cut, while the bottom 60 percent would on average pay more in taxes to the federal government.
The legislation, known as the “Tax Cuts and Jobs Act,” provides significant tax cuts to large corporations and multinationals, particularly Silicon Valley technology companies whose overseas profits would face little or no tax. In total, it offers corporations the largest tax corporate tax breaks in U.S. history. For individuals, its benefits tilt heavily toward the wealthiest Americans, according to a wide array of official and independent analyses.
“This is so clearly about a fraction of the top 1 percent of earners versus middle-income people,” Harris said. “What I find so outrageous about it is they’re duping the American people. They’re saying this is about middleincome earners and benefiting them, and it is so patently not.”
She and other Democrats were incensed over the Republican race to pass the bill, complaining they didn’t get the completed 479-page bill until 5 p.m. Friday EST, with hand-written notes still in the margins. The bill received no hearings, and Republicans were making major changes as late as Friday.
Senate Republicans allowed “no opportunity for debate, no opportunity for public discussion or public education,” Harris said. “The tragedy is their supporters don’t even know what’s in it.”
“You complain about process when you’re losing,” Senate Majority Leader Mitch McConnell, R-Ky., declared at a celebratory press conference after the vote.
He noted that “not a single Democrat thought this was a good idea,” implying that their unanimous opposition would hurt them at the polls next year.
“This is a great day for the country,” McConnell said, promising that the bill would “keep jobs from moving offshore” and “make America more competitive.”
In approving the bill, Republicans cast aside official projections of ballooning federal deficits, declaring that the legislation would “pay for itself” through faster economic growth.
The bill is structured around slashing the corporate tax rate to 20 percent from 35 percent, and reducing taxes on overseas profits. Multinational corporations that have stashed $2.6 trillion in profits abroad to avoid U.S. taxes would get a tax holiday on those earnings at roughly half the new corporate rate.
Many California households, however, could face higher tax bills because the legislation would repeal the deduction for state and local taxes to offset some of the cost of the corporate tax cuts.
The House passed its tax overhaul bill last month, and GOP leaders there prepared to begin negotiations with their Senate counterparts to produce a final bill that will have to be voted on again in both chambers before going to President Trump for his signature. Republicans are racing to enact the bill into law before Christmas.
Lacking any Democratic support, Republicans needed at least 50 votes to pass the legislation under special rules that prevent a Democratic filibuster. They hold 52 seats, and could have afforded to lose no more than two votes. Locking in Collins and Sen. Jeff Flake, RAriz., another holdout, brought them to 51 votes. Vice President Mike Pence called the vote total from the chair, but his vote was not needed to break a tie.
Flake said Friday that he would back the bill after securing promises from Republican leaders that they would work toward a deal extending protections for undocumented immigrants who were brought to the U.S. as children. But Senate leaders said they did not promise specifics.
Republicans said they found it much less challenging to unify around tax cuts, an animating force in the party since Ronald Reagan was president, than health care, which led them into a debacle last summer when they failed to repeal the Affordable Care Act despite using the same 50-vote, go-italone procedure.
“Taxes are easier,” said Sen. Ron Johnson, a Wisconsin Republican and one of the last holdouts who secured bigger tax cuts for businesses such as sole proprietorships, partnerships, so-called S-corporations, hedge funds and other entities whose incomes “pass through” to the owners.
Trump’s business empire is structured around some 500 passthrough entities that could benefit significantly, although by how much is unknown because Trump has not released his tax returns.
“We’re more confident about making American businesses more competitive,” Johnson said. “It’s a more unifying goal and it’s an easier problem to solve” than health care.
Sen. Bob Corker, RTenn., who is also retiring next year at the end of his term, was the lone Republican to vote no. He had failed to secure his goal of including a deficit “trigger” that would scale back the tax cuts if the GOP’s rosy growth predictions do not pan out. Conservative Republicans, urged by outside interest groups such as Americans for Prosperity, rebelled at the idea of scaling back tax cuts for businesses to reduce the deficit numbers and satisfy Corker.
“I feel somewhat like a dinosaur,” as one of his party’s last deficit hawks, Corker said.
Most Senate Republicans dismissed the deficit projections by the Joint Committee on Taxation, the official body of Congress that assesses tax bills, as overblown. The analysis found that growth fueled by the tax cuts would be minimal, and that the bill would add $1 trillion to the federal deficit over the next decade. Republicans said the “dynamic” estimates, which they demanded in order to show that tax cuts would self-finance, were grossly understated.
Faster economic growth “will more than pay for the bill,” said Sen. John Cornyn, RTexas, the Senate’s second-ranking Republican.
In the days before Friday’s vote, Democrats were easily rebuffed on every amendment they offered, including one by Sen. Tammy Baldwin of Wisconsin to close the notorious “carried interest loophole” used by hedge fund managers and other Wall Street investors to reduce their taxes. Trump denounced the loophole during the campaign, saying people were “getting away with murder.”
Sen. John Thune, R-S.D., said the tax bill is the product of “years” of GOP deliberations over tax policy and necessary to keep U.S. companies competitive around the world. Thune promised that the bill would lift wages and provide more “goodpaying jobs.”
The Congressional Budget Office, a nonpartisan arm of Congress that assesses the effect of major legislation on the public, found that the bill’s benefits are sharply tilted toward high-income earners. Although some middleclass and lower-income households could see modest tax cuts in the bill’s initial years, these expire by 2025, while the corporate tax cuts are permanent.
The bill also repeals the mandate that people buy health insurance or face a tax penalty. That is expected to raise premiums and drop 13 million people from the ranks of Americans with health coverage, the analysis said.
Combined, these provisions will raise taxes or reduce benefits for people earning less than $75,000, according to the budget office, while those earning more will see higher benefits. Most of the benefits would go to people who earn more than $1 million a year.
Rep. Mark DeSaulnier, D-Concord, who started his political career as a Republican, called the bill the “Koch brothers’ ultimate fantasy,” referring to the coal barons Charles and David Koch, who provide millions of dollars to GOP campaign coffers and fund Americans for Prosperity.
DeSaulnier said even the most conservative Republicans have become terrified of political challenges from the right funded by the Kochs, the Mercer family and other billionaire donors.
“It’s nothing for them to write $5 million or $10 million checks,” DeSaulnier said. “That’s a lot of money in a closed primary in a conservative district.”