The Senate narrowly passed a massive tax overhaul early Saturday morning, putting Republicans on the cusp of revamping the U.S. tax system for the first time in more than three decades.
The 51 to 49 vote came after Senate Republicans frantically rewrote the multi-trillion dollar legislation behind closed doors to win over several final holdouts, and left congressional Republicans just a few steps away from sending legislation to President Donald Trump’s desk. The House passed its own plan in November.
Sen. Bob Corker of Tennessee was the only Republican to oppose the measure, in what’s also a big victory for Senate Majority Leader Mitch McConnell (R-Ky.), who repeatedly fell short in his efforts to push through an Obamacare repeal measure this year.
“I think one reason we were able to get there was because there’s widespread interest,” McConnell said in an interview with POLITICO. “Every single member of our conference wanted to get to yes, and all but one did.”
President Donald Trump praised McConnell and Senate Finance Chairman Orrin Hatch in a tweet after the bill passed, adding, “We are one step closer to delivering MASSIVE tax cuts for working families across America.”
McConnell and GOP leaders were able to score the necessary votes on Friday by acceding to demands by Sens. Susan Collins of Maine, Ron Johnson of Wisconsin and others for expanded tax breaks for small businesses, homeowners and others. That gave leadership the breathing room to reject conflicting demands by Corker and others to rein in the cost of the plan.
Democrats harshly condemned the legislation and the way it came together.
“Millions of Americans must be watching in stunned disbelief tonight as the Republican Senate betrays the middle class for the benefit of faceless multinational corporations,” Sen. Ron Wyden of Oregon, the top Democrat on the tax-writing Finance Committee, said on the Senate floor shortly before the bill passed.
Democrats also ridiculed the GOP scramble to get the bill passed and the frequent rounds of horse trading required. Minority Whip Dick Durbin of Illinois posted a picture on Twitter that showed hand-scribbled changes on a page from the initial version of the lengthy Republican amendment to the legislation.
“Trying to review the #GOPTaxScam but they are making hand-written changes to brand new text as we speak – can anyone else read this?” Durbin jabbed.
Debate on the legislation spilled past midnight as the Senate debated numerous amendments, including one from Sen. Ted Cruz (R-Texas) that would extend tax-advantaged “529” college saving accounts to public, private and religious K-12 schools. It was adopted on a 51-50 vote after Vice President Mike Pence broke a tie.
The Senate struck a controversial provision from Sen. Pat Toomey (R-Pa.) that would have exempted Hillsdale College, a prominent conservative institution led by a Heritage Foundation board member, from a controversial new tax on university endowments. The school also has close ties to the family of Education Secretary Betsy DeVos.
House and Senate Republicans still have to settle the differences between their tax bills before Trump can sign a final bill, which would give the GOP the legislative achievement they’ve sought throughout their first year of regaining full control in Washington.
The House plans to vote Monday to formally set up a conference committee to hash out a final compromise, though some of the changes that Senate Republicans agreed to Friday also brought the two measures closer together.
“Now it’s time to take the best of both the House and Senate bills, make them even stronger in a conference committee, and finalize one piece of legislation that will dramatically improve the lives of Americans for generations to come,” Rep. Kevin Brady (R-Texas), chairman of the tax-writing House Ways and Means Committee, said in a statement after the Senate vote.
However, Senate leaders haven’t publicly committed to a formal conference.
Republicans are using powerful budget procedures to evade a Democratic filibuster of the bill, which allowed McConnell to lose up to two GOP votes and still pass the bill. After struggling all week to corral at least 50 votes for the tax measure, Senate GOP leaders ended up appeasing all but Corker.
Sen. Susan Collins (R-Maine) won a string of concessions for her vote, including a provision that would allow taxpayers to continue writing off property taxes, albeit with a $10,000 limit, and an expanded deduction for medical costs.
“As revised, this bill will provide much-needed tax relief and simplification for lower- and middle-income families, while spurring the creation of good jobs and greater economic growth,” Collins said.
In a particularly big victory for leadership, Johnson and Steve Daines (R-Mont.), both of whom had announced in recent weeks that they couldn’t support the bill, were won over by a proposal that would increase a tax deduction for pass-through businesses. They had complained that the Senate bill offered more tax relief to corporations than to pass-throughs, which are businesses – often small ones — that pay taxes as individuals.
Those businesses would see a deduction included in the Senate bill for them rise from 20 percent to 23 percent, a boost financed by increasing a proposed one-time tax on multinational corporations’ offshore earnings. The multinational provision also puts the Senate bill in line with the House measure, by charging 14 percent on those companies’ liquid assets and 7 percent on illiquid ones like facilities, up from the 10 percent and 5 percent the Senate had been considering.
“We’re going to have to reconcile that anyway, and might as well reconcile up front here to take care of our issue,” Johnson told reporters.
Though Johnson’s vote was likely never truly in doubt, he could have held out for more changes, which would have further handcuffed leaders as they tried to satisfy a duo of stubborn fiscal hawks alarmed that the measure would blow up federal budget deficits. A Joint Committee on Taxation report on Thursday found the proposal would add an extra $1 trillion to the federal debt over the next decade, even after considering economic growth.
Both Corker and Sen. Jeff Flake (R-Ariz.) pushed for a trigger mechanism that would have forced automatic tax increases if the bill didn’t jog the economy as much as Republicans hope. The Senate parliamentarian found that such a mechanism would violate complicated procedural rules, scotching a vote on the bill Thursday night and sending Republicans scrambling for alternatives.
Corker said Friday that he had “wanted to get to yes,” thanked GOP leaders and Trump for working with him in good faith and maintained that he would take another look at whatever measure might emerge from a conference committee. But he added that while “it would have been fairly easy to alter the bill in a way that would have been more fiscally sound without harming the pro-growth policies, unfortunately, it is clear that the caucus is in a different place.”
Unlike Corker, Flake supported the bill in the end, after securing language that phases down write-offs for business investments that had been slated to abruptly expire at the end of 2022. The Arizona Republican also got a “firm commitment” by party leaders to “work with me” on “fair and permanent protections” for undocumented immigrants threatened with deportation by Trump’s decision to end the Deferred Action for Childhood Arrivals program.
“Having secured both of these objections, I am pleased to announce I will vote in support [of] the tax reform bill,” he said in a statement.
GOP leaders also had to make changes elsewhere in the bill to fund some of the policy promises they had made. That included dropping plans to repeal the alternative minimum tax — a complicated batch of rules designed to prevent people from dodging taxes — that had been a key part of Republican plans to radically simplify the code.
Sen. Mike Rounds (R-S.D.) said they needed the money to finance other last-minute changes to the bill, including the expanded tax cut for pass-through businesses and the property tax deduction.
“Most members felt very strongly that we wanted a property tax exemption for individuals,” Rounds said. “The trade-off is there.”
Congressional Republicans have said in recent weeks that they don’t want to go into the 2018 midterm elections without a tax cut to show to voters. But it’s an open question just how much a victory on taxes will help Republicans politically.
The GOP proposals, which feature a large permanent cut in the corporate tax rate and temporary tax relief for individuals, have consistently polled poorly with voters.
Democrats have predicted that Republicans will end up paying a steep political price. But on Friday, Democratic leaders were mostly enraged by both the substance and process of the tax push. Most Democrats even voted against an amendment from Sens. Mike Lee (R-Utah) and Marco Rubio (R-Fla.), which was rejected, that would have further expanded the child tax credit while pushing the proposed corporate rate up from 20 percent to almost 21 percent.
Aaron Lorenzo, Jane Norman and Michael Stratford contributed to this report.
Powered by WPeMatico