Tax observers say that while congressional Republicans have made tremendous strides with tax reform in recent weeks, their greatest challenges lie ahead: a Senate floor vote and reconciling differences between the House and Senate bills.
“There’s a better-than-even chance that the bill could become law before year-end,” said Jeffrey H. Birnbaum of BGR Group in Washington. “Tax reform could go all the way if some holes are filled in here and there,” he said, citing differences in how the bills treat passthrough entities as a particularly thorny issue.
Birnbaum said he was “surprised it’s gotten this far this fast,” but cautioned that the Senate vote and conference committee are “likely to be difficult.”
G. William Hoagland of the Bipartisan Policy Center said there is a good probability that the Senate will pass its version of the bill, which makes the likelihood that tax reform will be signed into law “more likely than not.”
Jorge Castro of Castro Strategies LLC told Tax Analysts that there is “clearly momentum in Congress for passing a tax bill in the near future,” though it remains to be seen whether GOP legislators can fulfill their goal of doing so by the end of the year. That depends on how the upcoming Senate vote and conference negotiations go, he said.
Conservative activists at the National Taxpayers Union (NTU) likewise sounded a positive note during a November 21 conference call with reporters. NTU’s Mattie Duppler said that even a month ago the prospect of the House and the Senate Finance Committee passing a tax bill a week before Thanksgiving would have been a “laughable idea.”
“Seeing the process move forward with such inertia at this point really bodes well for getting a product done on time and delivering tax relief for Americans next year,” Duppler said.
Hoagland said a key factor in whether congressional Republicans meet their self-imposed deadline of having tax reform signed into law by Christmas is how they resolve differences between the House and Senate versions.
If they go the conference committee route, it will likely prove time-consuming, said Hoagland. Simply forming a conference committee requires senators to go through votes on several motions: they have to call up the House bill, strike everything from it, insist on the Senate’s amendment to the bill, ask for a conference, and then appoint conferees, said Hoagland. Then the House has to respond and appoint conferees of its own, he added.
And that’s all just to set up the conference committee, noted Hoagland; the conferees then have to come up with a compromise before then selling it to their respective chambers.
Castro explained that with so many significant differences between the two bills, there will be plenty of details for the two chambers to hash out. But with a tighter voting margin, the Senate will have more “negotiating leverage,” so it will likely fall on House Speaker Paul D. Ryan, R-Wis., to keep House Republicans in line, Castro said.
A more practical solution would be to avoid a conference committee altogether, Hoagland said.
“What I would anticipate is, much like what happened with the budget resolution in the Senate back in October, they had a manager’s amendment that had effectively been worked out with the House leadership ahead of time,” predicted Hoagland. In that case, after the Senate passed the manager’s amendment, the House simply took up the Senate version of the resolution and didn’t go to conference.
And with Democrats unlikely to support a tax reform bill anyway, “why go through the charade of conference where you have to appoint both Democrats and Republicans to the process?” Hoagland wondered.
But before all that, the Senate’s version of the Tax Cuts and Jobs Act first must survive a floor vote, which tax observers say may prove tricky.
Hoagland pinpointed several Republican senators as potential toss-up votes, including Susan M. Collins of Maine, John McCain and Jeff Flake of Arizona, Lisa Murkowski of Alaska, and Ron Johnson of Wisconsin.
Collins, for example, has expressed concern over a provision to repeal the individual healthcare insurance mandate. Murkowski had raised concerns about that provision as well, but now supports repealing the individual mandate, according to an opinion piece she wrote that appeared in the November 21 issue of the Fairbanks Daily News-Miner.
Hoagland predicted that Senate lawmakers would move to strike the provision to secure more votes, but cautioned that “it’s not that straightforward.” Budget reconciliation’s germaneness rules allow lawmakers to move to strike a provision from a bill, but “the difficulty here is that a motion to strike a provision if it jeopardizes the overall bill would still require 60 votes,” Hoagland noted.
Hoagland explained that if the individual mandate is simply stricken, the bill would lose the $338 billion it is estimated to raise. That would push it several hundred billion dollars over the $1.5 trillion 10-year deficit limit allowed under the reconciliation instructions, and require either 60 votes to waive a point of order, or include changes to provisions already included in the Senate Finance Committee-passed version of the bill, like pulling back on some of the tax cuts or tweaking effective dates.
He added that lawmakers wouldn’t be able to introduce new provisions to the bill because the Senate’s germaneness rules allow changes only to provisions in the bill itself. As a result, they couldn’t simply add a new revenue raiser, like a carbon tax or a VAT.
And while Collins has suggested she may support repealing the mandate if other healthcare legislation, spearheaded by Sens. Patty Murray, D-Wash., and Lamar Alexander, R-Tenn., is passed to shore up the health insurance markets, Hoagland said that legislation could not be combined with the tax bill under reconciliation rules. Collins would then have to rely on an informal agreement with GOP leaders, and it remains unclear whether the broader House and Senate would support that separate healthcare legislation, he said.
Hoagland also said the special election for the Senate seat in Alabama, where the Republican nominee Roy Moore has been embroiled in scandal for weeks, could complicate the Senate vote.
Assuming Moore wins the December 12 election, he wouldn’t be certified to serve in the Senate and sworn in for at least two weeks, during which time Sen. Luther Strange will continue to serve in that seat, according to Hoagland. He said Senate Republicans would be better off trying to pass the tax reform legislation beforehand, given that neither Moore’s victory nor his support for the bill are assured.
Holding the Line
For Hoagland, the idea that some Democrats might support the tax reform bills is long dead. “There will not be any Democrats that support the House bill or the Senate bill, regardless of what it is,” he said, adding that the Democrats will only become more entrenched the longer this goes on and as more unflattering analyses are published.
Former House Ways and Means Democrat Earl Pomeroy of North Dakota likewise suggested that the tax bill's unpopularity may bolster resistance from Senate Democrats up for re-election in red states.
"The bill has been highly partisan from the beginning and polling is showing little public enthusiasm for the tax reform package," said Pomeroy, now senior counsel at Alston & Bird.
"Without changes, it appears as though all of the Democratic senators will be voting against the bill," he said. “With so many vulnerable Democrats up in 2018, this united opposition is extraordinary. Normally, it is very hard staring down a tax cut bill in an election year.”
Follow Jonathan Curry (@jtcurry005) on Twitter for real-time updates.
Stephen K. Cooper contributed to this article.