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Senate Clears Procedural Hurdle on GOP Tax Reform Bill

Posted on November 30, 2017 by Stephen K. Cooper

The Senate cleared a procedural hurdle November 29 on the GOP’s tax reform plan, voting 52 to 48 to open debate on the fiscal 2018 budget reconciliation bill that includes the Tax Cuts and Jobs Act (H.R. 1).

The evening vote was preceded by hours of closed-door discussions among Republican lawmakers on how to secure the necessary 51 votes to pass the reconciliation package. Lawmakers also defeated a motion by Senate Finance Committee ranking minority member Ron Wyden, D-Ore., to send the bill back to the tax panel for further changes. Following the Wyden vote, Senate Majority Leader Mitch McConnell, R-Ky., was expected to offer a substitute amendment to swap in the Senate version of the tax bill.

Senate rules limit debate on the package to 20 hours, followed by a period of unlimited voting on amendments. Senate Republicans are looking to pass the legislation by December 1 in order to leave enough time to resolve discrepancies between the House and Senate versions of the proposal before the end of the year.

Some specifics of the Senate's tax reform plan remained fluid, as Republicans negotiated revisions to the bill in a bid for more support. Sen. Steve Daines, R-Mont., who previously pushed for changes to the bill to ensure it wouldn’t disadvantage small businesses, tweeted November 29 that he had secured a $60 billion tax cut for small businesses.

Details also have begun trickling out on another major change negotiated the day before — one that would set up a trigger mechanism to raise taxes in the event the bill doesn’t produce the expected economic effects. The Washington Post reported that the trigger proposal — which was added to win support from Sen. Bob Corker, R-Tenn. — would raise taxes by as much as $350 billion if the economy doesn’t grow by more than 0.4 percent annually above a baseline established by the Congressional Budget Office.

The rapid-fire changes to the bill before the floor debate began prompted Wyden to complain before the vote that Republicans had not shared updated details of the bill’s tax rates on passthrough businesses, the deduction for state and local taxes, repeal of the Affordable Care Act’s individual mandate penalty, and the fiscal trigger mechanism.

Senate Republicans are reportedly looking at a variety of options to offset the cost of the trigger proposal, including retaining the corporate and individual alternative minimum taxes, as well as an increase to the proposed 20 percent corporate tax rate, according to The Washington Post.

At least three Senate Republicans view the trigger proposal as a potential obstacle to passage. Sen. Thom Tillis, R-N.C., told reporters that the trigger idea is “well intentioned, but I don’t know if it’s well founded.” He added that when he served as speaker of the house in the North Carolina legislature, the state’s tax reform bill included a “reverse trigger” which would prompt additional tax rate reductions if growth exceeded projected numbers. Finance Committee member Dean Heller, R-Nev., and Sen. David Perdue, R-Ga., both said the trigger proposal would create an added layer of uncertainty for businesses, which may impede economic growth.

House Ways and Means Committee Chair Kevin Brady, R-Texas, declined to weigh in on the Senate measure, as he has repeatedly. “We’re going to let the Senate do their work,” Brady told reporters, reserving any judgment on the trigger proposal.

Democrats continued to rail against a provision in the Senate bill that would repeal the ACA’s individual mandate, citing a November 29 report from the CBO showing that a bipartisan healthcare compromise worked out by Sens. Lamar Alexander, R-Tenn., and Patty Murray, D-Wash., would not help 13 million Americans expected to lose insurance coverage as a result of the change or cover an estimated 10 percent rise in premiums for those with insurance.

“It is now crystal clear that if Republicans repeal significant parts of the Affordable Care Act to hand even more benefits to multinational corporations and the wealthiest, Americans’ healthcare will be devastated by hemorrhaging coverage and skyrocketing premiums regardless of any narrow measures Republicans push to try and soften the blow.” Wyden said.

Finance Committee Chair Orrin G. Hatch, R-Utah, disputed the CBO finding during a speech on the Senate floor, saying eliminating the mandate penalty would not harm people who choose not to have insurance. He said the mandate has failed to draw enough people to keep insurance rates low.

“Anyone going uninsured will be doing so voluntarily,” Hatch said. “We’re not kicking anyone off their insurance by zeroing out the individual mandate penalty, and it’s a blatant distortion of reality to claim otherwise.”

Some GOP senators view the tax measure as the last chance to pass major legislation before the 2018 midterms. After the vote to begin debate, Sen. Mike Rounds, R-S.D., told reporters that passage of the bill isn’t a simple formality.

“You never say never in this game, but for Republicans I think the vast majority of us truly believe that . . . failure is just simply not an option for us,” he said. “We have to find a way to get it done.”

Trump Stumps

President Trump spent November 29 trying to drum up support for tax reform, giving a speech in St. Charles, Missouri, extolling the benefits of a 20 percent statutory corporate tax rate found in both the House and Senate versions of the bill.

Trump described the current statutory corporate tax rate of 35 percent as “totally noncompetitive,” adding that, “For too long our tax code has incentivized companies to leave our country in search of lower tax rates.” The tax bill switches the tax code to a territorial system to bring profits back to the U.S., and it gives “a one-time lower tax rate” to repatriate corporate profits from overseas, he said.

He also contended that the bill would benefit middle- and lower-income families, saying that a family of four making $75,000, for example, would “see their taxes go down by as much as $2,000,” while many middle-income families would see their incomes rise by an average of $4,000.

“It’s not enough for the middle class to get by,” he said. “We want them to get way ahead.”

Trump also pledged to sign “a tax cut and reform bill” that Congress can get to his desk. “I will not veto that bill,” he said.

Dylan F. Moroses, Zoe Sagalow and David van den Berg contributed to this article.

Follow Stephen K. Cooper (ScoopOnTaxes) on Twitter for real-time updates.