Tax bill’s two versions present roadblocks
5 issues Senate, House must now reconcile
And now the real wrangling begins. After the Senate passed its tax cut bill early Saturday, the next step will be for senators to reconcile their version with the bill that passed the House on Nov. 16.
Some of those differences are dollar amounts, with each chamber setting brackets and deductions differently. But there are also substantive differences that could face pushback from House members, particularly conservatives, that have to be resolved before a bill could reach President Trump’s desk.
According to an internal poll of the conservative House Republican Study Committee obtained by USA TODAY, members were most concerned that the Senate bill sunsets individual tax cuts after 2025, delays the reduction in corporate rates until 2019 and continues to tax high-dollar estates.
The House could just pass the Senate bill and send it to Trump next week, but 97% of study committee members oppose that.
Rep. Mark Meadows, R-N.C., who chairs the House Freedom Caucus, said there did not seem to be any irreconcilable differences, however: “I’m very optimistic. On a scale of one to 10, with 10 being the highest that tax reform gets done, I’m at a nine.”
He said he expected a bill on Trump’s desk by the end of the year.
Before that happens, here are some of the rough edges that must be smoothed out:
Corporate rate delay
One of the most significant sections of the bill is the massive tax cut for corporations. Both bills would take the top corporate tax rate from 35% to 20%. But the Senate cut would happen in 2019, while the House bill would have the 20% rate kick in next year.
When the Senate unveiled its bill last month, Wall Street reacted to news of the delay with a 100-point drop in the Dow Jones industrial average.
Conservatives see no reason to delay what they believe will be an economic boom from cutting the corporate tax, and some worry about the effect on next year’s midterm elections.
“It would mean that the economy wouldn’t improve like it needs to, so we would lose the majority in the House and Senate, but the Democrats would take power just in time to take credit for the economy improving,” Rep. Louie Gohmert, a conservative from Texas, told reporters Thursday.
Elimination of the estate tax
Estates up to $5.5 million are exempt from taxes now. Both the House and Senate bills would raise that to $10 million, at least to start. But the House bill would increase the exemption above $10 million each year after next year and eliminate the estate tax after six years.
The Senate bill would leave the tax in place for estates over $10 million.
While the estate tax disproportionately affects a small number of high-in- come earners, it has become a priority of Trump’s. At a tax event in Missouri this week, Trump said it would be helpful for “loving families” to help their children.
House conservatives are expected to demand elimination of what they call “the death tax” in its entirety.
Repeal of the individual mandate
The Senate includes a repeal of the Obamacare provision that calls for an IRS fine on people who do not buy insurance. The House bill did not, but not necessarily because of pushback from members. Trump started pressing for it to be included after the House already had crafted its bill.
Senate Republicans then included the provision in their tax bill, and some moderates, like Sens. Susan Collins of Maine and Lisa Murkowski of Alaska, expressed concerns.
The Congressional Budget Office estimated that within 10 years, 13 million fewer people would have insurance, and those who buy it from governmentmanaged exchanges would see rates increase by 10% a year because the pool of patients would be sicker as healthier people opted not to buy coverage.
Collins and Murkowski were calmed by promises from Senate leadership and the president that Congress will advance a pair of separate bills intended to keep premiums down.
Because the House passed a repeal of Obamacare this year that included eliminating the individual mandate, such a provision isn’t expected to get significant pushback. But expect some moderate House Republicans to follow the example of Collins and Murkowski in calling for separate bills to stabilize the marketplace. And those bills will face pushback in the House, where conservatives believe any subsidies are a bailout to insurance companies.
Immigration
Like the insurance promises Collins and Murkowski received, Sen. Jeff Flake of Arizona voted for the bill in part because he was promised he would be part of an effort to prevent deportation of undocumented immigrants who were brought to the United States as children.
Flake did not say he was promised a bill to protect “DREAMERS” would be passed before the tax bill. But it is not clear the House would make such a bill a priority.
Sunset on individual rates
Where the House bill made most of its changes to brackets, credits, deductions and rates for individuals and families permanent, the Senate bill imposes them only for five years, after which the current tax code would kick back in.
That change, like the delay in the corporate reduction, was aimed at keeping the cost of the overall tax package from exceeding a $1.5 trillion limit set by the budget resolution adopted in October. It is something of a gimmick, because sponsors expect the tax cuts would be extended before they expire.
But the “sunset” provision was the No. 1 criticism of the Senate bill by the House study committee members. If the conference committee changes it, however, that could push the total cost of the bill over the $1.5 trillion limit.