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Senate GOP clears key hurdle on taxes

The Senate set the stage Wednesday for possible passage of its tax bill, voting to begin formal debate after a day of wheeling and dealing for enough Republican votes.

On a party line 52-48 vote, the Senate moved to formal debate on the GOP legislation, which Republicans are hoping to pass before the end of the year so they can take a key legislative victory into the 2018 elections after a year of disappointments on other major bills. The House passed its own version of tax reform earlier this month.

Senate GOP holdouts began lining up behind their party’s tax overhaul earlier in the day. But Republican leaders still have a litany of issues to resolve before the bill gets across the finish line, which they hope will be by week’s end. Those issues include an expected ruling from the Senate parliamentarian that could rule out a companion measure to allow drilling in the Arctic National Wildlife Refuge, one Senate aide said, although other sources downplayed how problematic that issue is.

Another factor, which would rile the White House, is a proposal to cut the corporate tax rate to 22 percent instead of 20 percent to free up money for a more generous child tax credit.

In a key concession, Senate Republicans agreed to increase the tax deduction offered to businesses that don’t pay corporate taxes, called “pass-throughs,” according to two GOP senators, a move meant to win over Sens. Steve Daines of Montana and Ron Johnson of Wisconsin.

Another GOP holdout, Sen. Susan Collins of Maine, voted to move the bill forward after assurances that other legislation would be passed to stabilize the health insurance market if Obamacare’s individual insurance mandate is abolished in the tax bill as planned. And GOP senators said they had made progress on a “trigger” mechanism to raise taxes or cut spending that would kick in if the bill fell short of economic growth projections, a change sought by Sens. Bob Corker of Tennessee, Jeff Flake of Arizona and James Lankford of Oklahoma.

At the same time, more than a few House Republicans, especially conservatives, gave poor reviews to the trigger proposal, potentially making it more difficult for the two chambers to reach a final compromise on a tax bill.

A negative decision on ANWR could also hurt the tax bill’s chances in the Senate, because it was seen as a key factor for Sen. Lisa Murkowski of Alaska, a longtime proponent of the expanded drilling who also helped topple the GOP’s Obamacare repeal efforts this year. But while one Senate aide said the parliamentarian found that the bill’s ANWR provisions ran afoul of strict budget rules, other aides said the issue could be worked around without much trouble.

Sen. John McCain of Arizona, who has kept his views on the tax bill muted this week, also voted to push it forward.

Other balking GOP senators also fell into line, including Jerry Moran of Kansas, who also has expressed concerns about the amount of red ink caused by the bill.

GOP senators earlier Wednesday said they were still working through the trigger sought by the three Republican deficit hawks, which experts say also violates Senate budget rules. Options for a trigger now include automatic spending cuts if the tax bill didn’t spur the economy as much as Republicans want, according to Sen. John Kennedy (R-La.).

Senate Republicans had also been discussing automatic tax increases as a trigger, while Sen. Ted Cruz (R-Texas) is among those pushing the idea of guaranteed tax cuts if the economy exceeds expectations in the future.

An earlier proposal that was floated would boost the corporate tax rate — currently set at 20 percent in the bill — by 1 percent to make up revenue if GDP did not grow an average of 0.4 percent during a five-year period. Another trigger proposal could prompt tax increases worth as much as $350 billion in additional revenue over a decade, starting in 2022, according to a source familiar with the negotiations.

Several GOP senators who said they didn’t like a trigger also voted for the motion to proceed to ensure the tax bill’s passage.

“We’re not talking about a large tax increase,” Lankford said. “We’re talking about small things around the edges to be able to guard against future increases in deficits.”

On the pass-through sticking point, the Senate bill would be changed to give the businesses a tax deduction of up to 20 percent of their income, an increase from the 17.4 percent currently in the measure.

But increasing the deduction would also give even more benefits to higher earners, feeding into Democrats’ criticism of a measure that most polls find unpopular. Daines said in a statement the proposal also would cost around $60 billion over a decade – which would take up most of the breathing room Senate Republicans have for their bill, which can cut taxes by no more than $1.5 trillion over a decade.

“There has been some good progress for Main Street businesses in the tax cut bill,” Daines said in announcing he would vote to proceed to the bill.

Collins previously had outlined a series of objections to the bill, including that it totally eliminated the deduction for state and local taxes. The Maine Republican said she decided to vote to proceed to the tax bill after securing assurances from GOP leaders that proposals to stabilize Obamacare insurance markets and protect pre-existing conditions would be included on must-pass legislation this year.

But Keith Hall, the director of the Congressional Budget Office, told lawmakers Wednesday that his office did not expect one of those proposals, cosponsored by Sens. Lamar Alexander (R-Tenn.) and Patty Murray, to prevent increases in health care premiums.

Meanwhile, a number of House Republicans unloaded on the trigger idea. The Republican Study Committee, a conservative group of over 150 House Republicans, won’t take an official position on the trigger until it holds a formal vote of all members.

But Rep. Mark Walker of North Carolina, the group’s chairman, said: “We don’t want it,” adding that not a single member of the group said they’d be willing to vote for the Senate tax reform package without further changes. The House passed its own tax bill this month, and GOP leaders there have repeatedly said the two chambers will go to a conference committee to resolve the differences in their bills.

At the same time, a pair of prominent Senate Republicans are pushing to raise the corporate tax rate from its current proposed 20 percent, in exchange for a larger benefit to families with children.

Sens. Mike Lee of Utah and Marco Rubio of Florida announced Wednesday they would introduce an amendment to do just that. It would take the corporate rate to 22 percent while making the child credit partially refundable and tie the changes to inflation. President Donald Trump has called the 20 percent corporate rate a red line, and the White House said Wednesday it would oppose increasing it to pay for a more robust child credit.

“We have a chance to do better by working families in this tax bill,” Lee and Rubio said in a statement, adding that “this amendment would level the playing field for families, while still kick-starting national investment and growth.”

Some other senators were amenable to the idea. “I wouldn’t be opposed to going up to do a number of things,” said Flake.

Rachael Bade and Sarah Ferris contributed to this report.

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