Menu

XRepublic

Unfiltered Political News

How McConnell got a win on taxes

On a recent phone call to discuss the GOP’s tax push, Senate Majority Leader Mitch McConnell suggested President Donald Trump focus his personal lobbying efforts on one senator in particular: Ron Johnson.

For weeks, the Wisconsin Republican had made it clear he would seek more generous tax treatment of certain small businesses — and that he was willing to use his vote as leverage. But after several phone calls from Trump and one final negotiating session inside Senate Majority Whip John Cornyn’s ornate Capitol office, Johnson said early Friday he would finally support the bill. That announcement made passage seem all but inevitable just one night after the bill nearly collapsed in spectacular fashion on the Senate floor.

McConnell and his leadership team ultimately secured passage of the tax code rewrite in the early hours of Saturday morning after weeks of methodically working each wavering vote, and by trying to learn the lessons of their Obamacare repeal failure.

It worked. By moving the tax bill through the committee process and letting more GOP senators give more input as they drafted the bill, the Kentucky Republican delivered a sorely-needed legislative achievement to his party in a year marked by turbulence on both ends of Pennsylvania Avenue.

“It’s been quite a year for Senate Republicans,” McConnell said in an interview with POLITICO as the chamber prepared to pass the bill. “We’ve changed the Supreme Court for a generation and done the first comprehensive tax reform in 31 years. Big year for us.”

McConnell also pointed to one other reason why the GOP succeeded on taxes but not health care: comprehensive tax reform has been a longstanding goal for Republicans, while there was little consensus on how to replace Obamacare despite their years-long pledge to dismantle it.

Senate Republicans still have to reconcile their differences with the House-passed tax bill, but McConnell said Republicans are “well on the path” to completing the tax overhaul by Christmas. That’s been a key party goal, and a timetable, he insisted, that was unrelated to the Dec. 12 special election in Alabama, in which Republican Roy Moore is in a close race against Democrat Doug Jones.

The political fight over taxes won’t end when the bill gets to Trump’s desk, however. While the GOP views the measure as a political imperative in advance of next year’s midterm elections, it has consistently polled poorly with voters. Democrats have savaged the bill, which cuts the corporate rate to 20 percent from 35 percent, as a giveaway to big business and the wealthy.

Still, McConnell dismissed the public perception of the tax bill, expressing confidence it will change.

“Can you think of any major legislation passed in the last 10 years that was popular? Remember how unpopular Obamacare was,” the Kentucky Republican said. “If [tax reform], in conjunction with regulatory relief, gets the country growing more rapidly and creates more jobs and opportunity, I think that will answer the skeptics.”

The tax victory, which came shortly before 2 a.m. Saturday, was never guaranteed. Facing unified Democratic opposition, McConnell could only lose two GOP votes before the entire effort sank, and leaders had to navigate a litany of competing demands.

There was the influential bloc of fiscal hawks led by Sen. Bob Corker (R-Tenn.), making noise about the tax bill’s red ink and going so far as to seek automatic tax increases to pay down some of the deficit. There was Johnson, who had teamed with Sen. Steve Daines (R-Mont.) to demand a costly change for so-called “pass-through” businesses, which pay taxes through the individual code.

And there was Susan Collins (R-Maine), a perennial swing vote, who had a detailed list of wishes that became more complicated as Republicans threw in a repeal of Obamacare’s individual mandate into the bill.

The furor over the deficit boiled over to the point that on Thursday, Corker and a coalition of tax holdouts contemplated voting with Democrats on a procedural vote that could have derailed the entire effort — prompting extended drama in the chamber that momentarily threatened the bill’s future.

Just before the vote, the non-partisan Joint Committee on Taxation had released their long-awaited report on the plan, and found that it would still balloon the deficit by $1 trillion even with the economic growth the legislation would generate.

GOP leaders were deeply worried about what kind of impact the report would have on Corker’s thinking and tried to persuade the undecided senators not to vote for the Democrats’ measure, which would force senators to return with a deficit-neutral tax bill. But for more than an hour on the floor, Corker, Johnson and Sen. Jeff Flake (R-Ariz.) stubbornly held off, trying to use their leverage to force changes to the tax measure.

“Sen. Corker called me and said, ‘Why shouldn’t we vote for that one?’” Johnson recalled. “There’s always parliamentarian maneuvers, right?”

Elizabeth MacDonough, the Senate parliamentarian, was summoned to the gaggle. Senators were told that a proposed “trigger” — which would kick in with tax hikes if the projected economic growth never materialized—would run afoul of budget rules and would have to be axed. At one point, a furious-looking Cornyn loudly told Sen. Angus King (I-Maine), who had felt Democrats were close to pulling the trio of Republicans to their side, that the maneuver would “kill the bill.”

“I thought we already had worked everything out,” sighed Cornyn after the theatrics.

That floor battle ended up being the last moment when the Senate tax bill looked truly in doubt — about a year after the Republican effort to overhaul the tax code began in earnest.

Not long after the 2016 election, McConnell and Senate Finance Committee Chairman Orrin Hatch (R-Utah) quietly tapped four Senate Republicans — Pat Toomey of Pennsylvania, Rob Portman of Ohio, Tim Scott of South Carolina and John Thune of South Dakota — to be the GOP conference’s point people on the tax battle. The group immediately began meeting in December to lay the groundwork for the legislative push.

And after the failure of Obamacare repeal, Republicans were determined to do things differently.

“They’re listening carefully to all of the concerns,” Sen. Mike Rounds (R-S.D.) said of leadership. “They’ve gone out of their way to make sure regular order has been observed, as demanded and expected by many of the members.”

Democrats called suggestions of “regular order” outrageous as Republicans rushed the bill to passage. But McConnell was sure to hold a committee markup of the measure, which he did not do with health care, and which was a main reason Sen. John McCain (R-Ariz.) voted that bill down.

One controversial idea that became surprisingly easy: Repealing Obamacare’s individual mandate in the tax measure, which McConnell noted “certainly takes a big chunk” out of the 2010 health care law.

Despite having just failed to repeal and replace the law, various Senate Republicans had pushed for including the mandate repeal in the tax bill. And when senators realized doing so would net nearly $350 billion to plow into more tax cuts, it gained steam. As far back as May, Daines was seeking data from the Internal Revenue Service that would break down the impact of the mandate penalty by state and income, giving GOP senators handy statistics for talking points once those numbers materialized.

Collins expressed discomfort with the mandate repeal, but negotiated other wins, including to allow people to deduct $10,000 on state and local property taxes, mirroring a House provision. Sen. Lisa Murkowski (R-Alaska), who also helped sink the GOP’s Obamacare repeal bill, said she ultimately had no problem with removing the mandate. And she claimed a big victory in getting language to drill in the Arctic National Wildlife Refuge.

Though the House bill doesn’t include the health care provision, Senate Republicans are cautiously optimistic that it’ll be included in the final product; Daines noted, “If you don’t, tell me where you’re going to find $350 billion?”

Resolving some of the final issues happened inside Cornyn’s office shortly before 7 p.m. Thursday, when the No. 2 Republican met with Johnson, Daines and Sen. Lindsey Graham (R-S.C.) to lay out how the leadership would ultimately meet their demands: Boosting a one-time tax on multinational companies’ overseas earnings in order to pay for better treatment of “pass-through” businesses.

Cornyn later called Johnson around 10 p.m. to confirm that the Wisconsin senator would get mostly what he wanted.

“I just really appreciated working with us in good faith,” said Johnson, who fielded at least three phone calls from Trump since he declared his opposition to the first version of the tax bill. “When it came down to crunch time, I wanted more. But I’m a reasonable human being.”

Meanwhile, Corker and Toomey — who had brokered a budget deal earlier this year that helped provide a framework for the tax measure — worked quietly into the night with the parliamentarian to see if some other trigger could suffice and Corker could be a “yes.”

In the final day of the tax fight, the typically-harried legislative process became even messier. Republicans tacked on sweeping last-minute changes. Aides scribbled handwritten revisions to the bill just before senators would vote on the final package, which Democrats relentlessly mocked on Twitter.

Inside the last GOP conference meeting in the Capitol, Corker thanked Toomey for working hard with him to try to reach a final deal on the deficit trigger, even though they fell short. He detailed his concerns that the bill was a huge budget-buster, but it was clear to people inside the room that Corker knew he wouldn’t win.

Ultimately Corker stood alone, being the sole Republican to reject the tax bill, along with all Democrats. The dwindling bloc of deficit hawks would keep getting lonelier.

“I know I’m kind of a dinosaur on the fiscal issues,” said Corker as he held a cup of coffee, just outside the Senate chamber Friday. “And I’m really not that old. By Senate standards, I’m a teenager. But I do feel like a dinosaur.”

McConnell could do the math, and he could leave Corker behind.

Powered by WPeMatico