Tax plan cruising toward easy OK
Key GOP senators relent, end holdout
WASHINGTON — Republicans in Congress appeared to be cruising to easy passage of their proposed $1.5 trillion tax overhaul after the lone Senate Republican to oppose an earlier version said Friday he would support the plan when it comes up for a vote early next week.
House and Senate votes on final passage are scheduled for Tuesday on a bill that would transform the taxation of U.S. businesses and affect every taxpayer and the national budget for decades — and hand President Trump the first major legislative victory of his presidency.
Desperate to notch the win and largely united in their desire to cut business taxes, Republicans made a headlong, six-week sprint to get the bill to Trump’s desk before Christmas — and before losing an Alabama Senate seat to a newly elected Democrat that will shrink their majority in that house to 51-49 next year.
The final version of the legislation, a 1,101-page document made public late Friday, was negotiated by House and
Senate leaders behind closed doors, drawing from the separate bills passed earlier by the House and Senate. Its passage was all but secured when Tennessee’s Republican Sen. Bob Corker, who had voted against the original Senate version Dec. 2, said he would support the bill this time. His announcement came just moments after Sen. Marco Rubio, R-Fla., also said he would vote yes after holding out for a more generous child tax credit.
For Californians, new details of the final proposal show that last-minute changes made during the reconciliation of the two initial bills may ease but won’t erase the potential cost to many residents who will no longer be able to deduct all of their state and local taxes. The final version caps the deduction at $10,000 and remains one of the most contentious and costliest provisions in the bill.
“Our concerns still stand about something of this scope and magnitude that could affect 18 million taxpayers in California and a $2.6 trillion economy,” said California Department of Finance spokesman H.D. Palmer. “This isn’t a measure that should be rushed to meet an artificial deadline, in the governor’s view.”
The finance department had sent a letter Wednesday to all members of the California congressional delegation urging them to oppose the bill.
Rep. Darrell Issa, the San Diego County Republican who was one of three of California’s 14 House Republicans to vote against the original House version, said he remains opposed.
“Unfortunately the changes do not go far enough to guarantee tax relief for constituents in my district,” Issa said in a statement. Despite revisions to the state and local tax deduction, urged by House Majority Leader Kevin McCarthy, RBakersfield, Issa said, “I still fear that, even in the revised proposal, many in my area could face higher taxes under this plan.”
The provisions affecting individuals are secondary to the bill’s core structure, which revolves around a giant corporate tax overhaul that would exclude from U.S. taxes most overseas profits of U.S. multinationals, a tax break that critics argue would invite such companies to move operations overseas.
But Republicans hope that because the bill also would slash the corporate tax rate from 35 percent to 21 percent, U.S. corporate taxes will drop below those levied by other industrialized countries. In turn, the companies would be induced to keep operations at home or even move them back to the United States.
The bill would also bar future deductions of casualty losses from fires, earthquakes, floods and other natural disasters and thefts, unless they are a presidentially declared disaster. Californians accounted for nearly half of those deductions nationwide in 2015, according to the state Department of Finance, claiming $700 million in deductions that year. The bill would take effect Jan. 1 and so would not affect losses declared from this year’s fires in California.
A key provision of the Affordable Care Act, the mandate that people buy health insurance, would also be eliminated. The Congressional Budget Office has estimated that doing so would raise premiums on the individual market by 10 percent and lead to 13 million people losing their health insurance.
Rep. Barbara Lee, D-Oakland, said if the tax bill passes, Democrats will try to repeal the legislation at their first opportunity.
“We’re working very hard to make sure that Democrats take back the House and the Senate so that we can begin to try to unravel some of this,” Lee said.
She singled out, as have others, the 11 California Republicans who voted for the original House bill, most of whom seem likely to support the final version. “I hope that people, as we say, stay woke, and hold these members who are voting for this accountable in the next election.”
Rep. Ro Khanna, D-Fremont, said the GOP’s “cynical theory” is that tax cuts, once in place, will be permanent because reversing them would require Democrats to raise taxes.
Corker, the Tennessee Republican, initially opposed the Senate version because it would add at least $1 trillion to the federal deficit over the next decade, but said Friday he had reconsidered after talking with business leaders in his state. Corker called the bill a “once-in-a-generation opportunity to make U.S. businesses domestically more productive and internationally more competitive.”
But Khanna said the bill “has no investment in human capital, no investment that’s going to deal with income inequality and unleash the human potential of Americans to compete in the 21st century.”
“It’s doubling down on giving the breaks to the investor class and hoping that they will drive economic growth,” he said.
In what he says is a counter to the GOP plan, he, along with Sen. Sherrod Brown, D-Ohio, have proposed a $1.5 trillion plan that he said “would basically give a $10,000 pay raise to working families making under $100,000 that would make up for the wage stagnation in this country.”
The economy is at what economists consider full employment, and corporate profits and the stock market are at record highs. But if the bill does boost growth beyond that, as Republicans hope, it will still add at least $1 trillion to the federal deficit over the next decade, according to the Joint Committee on Taxation, the nonpartisan arm of Congress that analyzes tax laws.
House Speaker Paul Ryan, R-Wis., said Thursday that Republicans would deal with the deficit by next tackling entitlement programs, which include Social Security, Medicare and Medicaid, as well as what he called poverty programs. “We need to push and pull people out of poverty,” Ryan said.
Republicans hold a 52-48 majority in the Senate, and are using a special parliamentary procedure that prevents Democrats from blocking their tax bill by a filibuster, which would require 60 votes to break. No Democrats plan to vote for the bill. With Corker’s switch to yes, the bill might win unanimous Senate GOP backing. Republicans won over Rubio by expanding the child tax credit from $1,000 to $1,400.
Moderate Sen. Susan Collins, R-Maine, voted for the original Senate bill, and Sen. Lisa Murkowski, R-Alaska, is an enthusiastic supporter because the bill opens the Alaska National Wildlife Refuge to oil and gas drilling.
Republican Sens. John McCain of Arizona and Thad Cochrain of Mississippi have been ill, but are expected to be available to vote.