Senate Suspends Bill Votes to Friday Morning: Tax Debate Update

The Senate tax bill is headed for a marathon debate this week after Republican leaders brought the measure to the floor Wednesday with the goal of holding a final vote by the end of the week. Here are the latest developments, updated throughout the day:

Senate Republicans Scramble to Salvage Bill (8:51 p.m.)

Senate Majority Leader Mitch McConnell said votes on the tax bill will resume at 11 a.m. on Friday as the collapse of a key compromise to win a majority for a Senate tax overhaul left Republicans scrambling to salvage the legislation.

Debate over the bill may continue into the evening, McConnell said. It’s unclear when the unlimited amendment vote series known as “vote-a-rama” would begin.

After seeming to gain momentum during the day, the GOP’s tax cut plan smacked into a decision from the Senate’s rule-making office that said a so-called trigger proposed by GOP holdouts didn’t pass procedural muster. At least three Republicans — Bob Corker of Tennessee, Jeff Flake of Arizona and James Lankford of Oklahoma — had tied their votes to the mechanism, which would have increased taxes if revenue targets weren’t met. The trio is now demanding that leaders agree to other changes in the bill to avoid a huge deficit increase.

Republicans have a slim majority in the Senate and can only afford to lose two members if they want to pass the tax bill without Democratic support.

Adding to the difficulty was a ruling by a key fiscal referee that the tax plan would blow a $1 trillion hole in the nation’s debt — even after accounting for economic growth.

The day’s events left GOP leaders contemplating a variety of potentially unpalatable measures — including making some tax cuts on the individual and corporate side end within six or seven years. The current version of the Senate bill would sunset individual breaks in 2026.

It’s a potential nightmare scenario for Republicans, who have been counting on a tax overhaul to be their first major legislative accomplishment of the year. The party is under enormous pressure to complete the tax measure with less than a year to go before the mid-term elections and with wealthy donors and large corporations demanding tax rate cuts.

Senator Ted Cruz of Texas “absolutely” will fight Corker’s effort to add taxes back to the Senate’s tax bill, he said in a brief interview late Thursday as he left the Senate following a lengthy conversation with Corker on the Senate floor.

"Fifty-one senators want to cut taxes," Cruz said. "One is trying to raise taxes. That’s not right."

A subdued Corker said minutes earlier the bill is "still changing."

“I’m trying to do the best I can to make it a better bill,” Corker said.

No. 2 Senate Republican John Cornyn said his preference would be not to add additional taxes, "but what I want most is 50 votes," he said.

Cornyn said Senator Pat Toomey is working with Corker to reach an agreement.

Senator Ron Johnson of Wisconsin also held out during an hourlong standoff on the Senate floor over a procedural vote that would have sent the measure back to the Senate Finance Committee. Johnson said he wants to ensure he can offer amendments, including one to raise the pass-through deduction to about 25 percent, paid for by eliminating the corporate deduction for state and local taxes.

Another GOP senator whose support is in question, Susan Collins of Maine, is pushing to preserve the deduction for individual property taxes up to $10,000. That issue could be headed for a resolution. The Senate will ultimately adopt the House Republican proposal allowing the property tax break, according to Senator Mike Rounds of South Dakota, who’s close to Republican leaders.

Republican Senator Lindsey Graham added: “I think you’re going to see a lot of these scrums, and here’s the way they’ll end: We’ll pass the bill sometime tomorrow.” — Laura Litvan, Erik Wasson, Steven T. Dennis and Sahil Kapur

Senate Bill Seen Losing $1 Trillion After Growth (5:09 p.m.)

A new analysis released Thursday by the Joint Committee on Taxation found that the Senate tax bill would generate enough economic growth to lower its $1.4 trillion revenue cost by only about $458 billion over a decade.

After accounting for interest rates, the growth figure would fall to $407 billion, said the JCT, Congress’s official scorekeeper on tax legislation. That would leave a 10-year revenue loss of roughly $1 trillion.

The bill’s backers have argued the tax plan would pay for itself through robust economic growth resulting from the cuts — but the new analysis is the latest among several to counter that argument. JCT estimated that the bill would boost gross domestic product by about 0.8 percent on average over the next 10 years.

Growth estimates are especially important for a trio of senators — Bob Corker of Tennessee, James Lankford of Oklahoma and Jeff Flake of Arizona, who have voiced concerns about tax cuts adding to the deficit. The three support adding a revenue trigger to the bill that would provide for an automatic tax increase if revenue targets weren’t met, and Senate Republicans are wrangling over the issue.

Discussions have centered around a $350 billion tax-increase trigger, far short of the $1 trillion revenue loss the JCT projects.

A conservative-leaning policy center, the Washington-based Tax Foundation, released a statement saying JCT’s findings were “likely underestimating the economic growth spurred by this tax bill.”

“The range of estimates from JCT includes several important assumptions that limit its growth results, particularly, assumptions regarding the Federal Reserve’s response to potential inflation and the United States being a closed economy,” the policy group said in a statement. The group is working on its own score for the latest version of the Senate bill.

The Senate bill includes a provision that repeals all the individual tax cuts by 2026, which would tend to crimp economic growth. Senate tax writers included the expirations to make the bill comply with Senate rules against budget legislation increasing long-term deficits.

The new estimate “ends the fantasy about magical growth and claims that tax cuts pay for themselves,” said Senator Ron Wyden, the top Democrat on the tax-writing Senate Finance Committee, who called the finding the “total opposite” of what Republicans have said.

“It’s hard to see how they’re going to fix this with some kind of trigger,” Wyden said.

A spokeswoman for the Senate Finance Committee said official findings that the Senate tax bill would reduce federal revenue by about $1 trillion over 10 years — even after accounting for economic growth — “are curious and deserve further scrutiny.”

It’s unclear when that scrutiny might take place. Senate Republicans have already voted to begin debate on the tax bill, leaving little time for the sort of public consideration that typically takes place in committee hearings.

Nonetheless, Senate Finance spokeswoman Julia Lawless called the JCT analysis “incomplete” because the Senate bill is “evolving.”

Senators have so far written more than 70 potential amendments to the provision — though it’s unclear how many of them might be considered. Senate Majority Leader Mitch McConnell has not announced any new timetable for a vote on the actual bill, though he and others have set a goal of passing it by the end of this week. — Sahil Kapur, Erik Wasson and Laura Litvan

John McCain Says He Will Support Senate Bill (2:03 p.m.)

Republican John McCain of Arizona said in a statement Thursday that he’s decided to support the Senate tax bill — helping GOP leaders get one step closer to passing their overhaul.

McCain hadn’t taken an official position on the tax plan until now — and no one was taking his vote for granted after he shocked the political world by voting against a rushed attempt to demolish the Affordable Care Act this summer.

“I believe this legislation, though far from perfect, would enhance American competitiveness, boost the economy, and provide long overdue tax relief for middle class families,” McCain said in the statement.

The Arizona lawmaker joins Lisa Murkowski of Alaska — another GOP senator whose support had been in question — in publicly endorsing the Senate tax bill in recent days. The GOP has a slim majority in the Senate, and can only afford to lose two of its 52 members to pass a bill without Democratic support. Republican senators that could still prove difficult votes include Susan Collins of Maine, Bob Corker of Tennessee, Jeff Flake of Arizona, James Lankford of Oklahoma and Ron Johnson of Wisconsin.

Negotiations were ongoing Thursday to address some of the senators’ concerns, including over a trigger provision that would automatically increase taxes if economic growth doesn’t meet revenue targets.

It’s unclear how long the 20 hours of tax debate currently ongoing will stretch. It could continue into the wee hours of Friday morning before kicking off the unlimited amendment vote series known as “vote-a-rama” overnight. Republican leaders said Thursday morning they hadn’t yet decided whether to just resume the process Friday morning, since an all nighter for some members would be hard, according to Collins. McCain is 81 and battling brain cancer.

McCain has pushed for the Senate to return to regular order — hearings, markups, bipartisan input and amendments — for passing major bills, including tax legislation. He had signaled support for the Senate Finance Committee’s process after it approved a tax proposal earlier this month.

McCain has had a mixed record on tax cuts, voting against measures in 2001 and 2003, citing deficit concerns.

“I take seriously the concerns some of my Senate colleagues have raised about the impact of this bill on the deficit,” McCain said. “However, it’s clear this bill’s net effect on our economy would be positive.”

McCain’s statement added to an already buoyant tone in the U.S. stock market. The Dow Jones Industrial Average extended its climb past 24,000 while the S&P 500 was set for its longest monthly winning streak since 2007, rising more than 1 percent. The dollar erased earlier losses, gaining as much as 0.6 percent against the yen as Treasuries declined, sending 10-year yields above 2.4 percent, to their highest level so far this month. — Alexis Leondis and Chris Nagi

Collins Says ‘Not Committed’ on Bill Yet (9:33 a.m.)

Republican Senator Susan Collins of Maine said it “would be very difficult” to support the Senate tax bill unless Congress agrees to preserve an individual deduction for state and local property taxes and passes separate legislation to support the individual health care market.

“I am not committed to voting for this bill,” she said during a breakfast session organized by the Christian Science Monitor. She has said that Senate Majority Leader Mitch McConnell has committed to making health care legislation a priority.

Collins also said she’ll pursue an amendment to enhance the child tax credit — and pay for the revenue cost by ending the “carried interest” tax break that favors investment managers. Carried interest is the portion of an investment fund’s profit — usually 20 percent — that’s paid to investment managers. Currently, it’s taxed as capital gains, meaning it qualifies for a tax rate as low as 23.8 percent. The top individual tax rate is currently 39.6 percent.

The Senate bill would address carried interest by requiring that only gains on assets held more than three years — up from one year — would qualify for the break. Collins called that provision “modest.”

Collins’s health-care concerns center on the Senate bill’s provision to repeal the Obamacare law’s individual mandate, which requires individuals to buy health insurance. Repealing the provision is estimated to save the federal government more than $300 billion over 10 years and result in roughly 13 million fewer insured people.

On the property-tax deduction, Collins said she’s seeking a provision that would mirror the House bill approved earlier this month: retaining the break for property taxes, but capping it at $10,000. Currently, the Senate bill proposes to abolish deductions for all state and local taxes. — Erik Wasson

Corker Says Trigger Deal Still Facing ‘Difficulties’ (4:00 a.m.)

Senate Republicans are looking to approve their tax-overhaul legislation as soon as Thursday night — but wrangling continues over whether to include a trigger for tax increases if economic growth doesn’t meet revenue targets.

“They’re having a few difficulties but hopefully in the morning they’ll have something,” Senator Bob Corker of Tennessee, who’s pushing for the trigger mechanism, said Wednesday evening. “There’s nothing to show right now.”

Corker and Republican Senator Pat Toomey of Pennsylvania are negotiating over the trigger concept, according to Senate Majority Whip John Cornyn of Texas. Corker and Toomey, both members of the Budget Committee, reached an agreement in September that allowed a budget that would add to the deficit.

Toomey said a deal would be announced Thursday, but declined to provide details.

Corker, along with Arizona Senator Jeff Flake and Oklahoma Senator James Lankford, have said their votes are contingent on the tax trigger. Others, like Senator Thom Tillis of North Carolina have said they are wary of the effect on the economy of tax increases during a recession.

While Senate Finance Chairman Orrin Hatch said he thought it was likely a trigger would be included, Senator David Perdue of Georgia countered that saying: “There is no foregone conclusion that we will have a trigger. Because there is a debate going on about that.”

“We’re not going to do anything to jeopardize this bill,” Perdue said.

In addition to deciding whether or how to include a future tax increase if revenue targets aren’t met, Republicans may have to tweak or add other provisions during the next 24 hours or so to secure the votes they need. Another change in the works would deepen the tax cut for pass-through businesses such as partnerships and limited liability companies.

All 52 Senate Republicans united to vote to open debate on the $1.4 trillion tax-cut measure Wednesday in the latest sign that the bill has the momentum it needs to pass. Republicans must have 50 of their 52 members vote “aye” in order to send the bill to a planned House-Senate conference, the next step in GOP efforts to get tax legislation to President Donald Trump by the end of 2017.

The Senate is now spending 20 hours of limited debate time on the tax bill. During that period, Democrats may try to strip out parts of the bill by raising objections to them based on Senate rules. Republican staff members have been working to tweak tax and oil-drilling provisions in the bill to comply with rules meant to exclude provisions that aren’t primarily fiscal in nature.

The formal debate time is set to expire close to midnight on Thursday, after which an unlimited amendment vote series known as “vote-a-rama” would ensue. Senators could agree to speed up the debate and start the amendment votes sooner.

During vote-a-rama, Democrats are likely to offer numerous amendments meant to highlight any flaws they believe the bill contains. Democrats say the bill gives most tax benefits to the wealthy while raising taxes on many in the middle and working class, in addition to increasing budget deficits.

“What’s on offer is a plan to force working people and middle-class families to pay for handouts to corporations and tax cheats," said Democratic Senator Ron Wyden as debate kicked off Wednesday evening.

Republican Senator Mike Enzi, chairman of the Budget Committee, disputed that characterization. “We need tax reform that will make our system simpler and fairer and allow people to keep more of what they earn,” he said. “This bill before us would do that.”

Some Republicans are expected to offer amendments that would be paid for by setting the corporate rate higher than the 20 percent proposed in the Senate tax bill. The current corporate rate is 35 percent.

Moderate GOP Senator Susan Collins filed an amendment that would retain the individual deduction for state and local property taxes and cap it at $10,000 for individuals — mirroring the House tax bill. She said she would pay for the change with a 21 percent corporate rate and by keeping the individual top rate at 39.6 percent.

“I think it’s significant that many members believe that we don’t need to go all the way to 20 percent in order to spur investment and job creation,” Collins said.

Republican senators Mike Lee and Marco Rubio also plan to make the bill’s child tax credit refundable up to 15.3 percent of earnings, paid for with a 22 percent corporate rate.

Behind the scenes, Republicans will be crafting a final substitute amendment containing any changes they’ll need to get the required 50 votes.

Wavering senators Steve Daines of Montana and Ron Johnson of Wisconsin appear to be on track to support the bill after securing a 20 percent deduction for pass-throughs, an increase from the 17.4 percent in the draft bill. Johnson said Wednesday he expects to see the larger deduction included in the final version of the Senate legislation. He added he would support an amendment calling for the elimination of state and local tax deductions for corporations. — Erik Wasson, Kaustuv Basu, Allyson Versprille and Laura Davison

What to Watch on Thursday:

  • Senate Republicans approved the “motion to proceed,” 52-48, on party lines. After up to 20 hours of debate, the chamber will begin considering a series of amendments proposed by senators in what’s known as a “vote-a-rama” marathon that’s likely to end with an amendment by Republican leaders incorporating all the changes.
  • Tax writers may release details of the trigger concept. GOP senators have discussed a provision that would allow for as much as $350 billion in automatic tax increases starting in 2022. Republican Senator Ted Cruz of Texas has said he’s working on a trigger provision that would apply two ways and bring additional cuts if there’s robust growth.
  • The nonpartisan Joint Committee on Taxation may release a “dynamic scoring” analysis of the bill’s effect on the deficit.

Here’s What Happened on Wednesday:

  • President Donald Trump said the tax overhaul would hurt him financially, disputing findings from the non-partisan Congressional Research Service and other analysts saying top earners would benefit more than the middle class.
  • Senate Republicans agreed to raise a proposed deduction for pass-through businesses, such as partnerships and limited liability companies, to 20 percent from 17.4 percent, according to Republican Senator Steve Daines of Montana.
  • Republicans Senators Marco Rubio and Mike Lee said they plan to introduce an amendment that would enhance the child tax credit — and offset the cost by setting the corporate rate at 22 percent, higher than the 20 percent rate President Donald Trump favors. The White House said the president doesn’t support the amendment.
  • Republican Senator Susan Collins of Maine said she would vote to begin debate after she got a commitment from Republican leaders to put legislation aimed at stabilizing Obamacare’s insurance exchanges on a must-pass bill next month.
  • The bill got an important commitment as GOP Senator Lisa Murkowski of Alaska said she would vote for it.

    Read more: http://www.bloomberg.com/news/articles/2017-11-30/republicans-grapple-over-trigger-provision-tax-debate-update

    Should the Upper Middle Class Take the Biggest Tax Hit?

    Humans learn the concept of fairness at a very young age. After all, it doesn’t take long for a child to start whining about a sibling who gets an extra serving of ice cream. As the Republican-controlled Congress tries to push through tax reform this year, one group of Americans may similarly question why it’s coming up a scoop short.

    The upper middle class gets relatively few benefits and a disproportionate number of tax hikes under the $1.4-trillion Tax Cuts and Jobs Act approved by the U.S. House of Representatives last week. Families earning between $150,000 and $308,000—the 80th to 95th percentile—would still get a tax cut on average. But by 2027, more than a third of those affluent Americans can expect a tax increase, according to the Tax Policy Center.

    If the House bill becomes law, overall benefits for the upper middle class will start out small, and later vanish almost entirely.

    Is this fair? Some argue it’s only right for the upper middle class to carry a heavier burden. This is because the top fifth of the U.S. by income has done pretty well over the past three decades while the wages and wealth of typical workers have stagnated. People in the 81st to 99th percentiles by income have boosted their inflation-adjusted pre-tax cash flow by 65 percent between 1979 and 2013, according to the Congressional Budget Office. That’s more than twice as much as the income rise seen by the middle 60 percent. (The top 1 percent, meanwhile, saw their income rise by 186 percent over the same period, but that’s another story.)

    “Many upper-middle-class families will tell you they do not feel wealthy,” said Brian Riedl, a senior fellow at the Manhattan Institute, a right-leaning think tank. “Their standard of living [is] closer to the middle class than to the top 1 percent.” The income numbers don’t tell the whole story, he explained. The upper middle class is weighed down by high costs: Affluent workers live in expensive areas, pay a lot for real estate and daycare, and are taxed far more than Americans further down the ladder.

    Richard Reeves, a senior fellow at the left-leaning Brookings Institution, isn’t buying that argument. He’s the author of “Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It.”

    “There’s a culture of entitlement at the top of U.S. society,” Reeves said. While others focus on rising wealth of the top 1 percent, Reeves argues that the gap is widening between the top 20 percent and everyone else. The upper middle class is guilty of “hoarding” its privileges, using its power to skew the job market, educational institutions, real estate markets, and tax policy for its own benefit, he contends.

    “The American upper middle class know how to take care of themselves,” Reeves said during a presentation at the City University of New York last week. “They know how to organize. They’re numerous enough to be a serious voting bloc, and they run everything.”

    So by his measure, the tax legislation’s disproportionate hit to the upper middle class is indeed fair.

    A family earning $240,000 a year is bringing in four times the U.S. median household income of $59,000, according to the U.S. Census Bureau. All that money, along with the upper middle class’s political power, buys some huge advantages, Reeves said. For example, affluent parents compete for access to the best schools, bidding up home values in the best school districts. Then, they use zoning rules to prevent new construction, keep property values high, and prevent lower-income Americans from moving in. In the process, children of this demographic end up at the most prestigious universities, nab the best internships and jobs, and ultimately join their parents at the top of U.S. society. 

    The very existence of the House tax bill rebuts Reeves’s argument that the upper middle class is in a position to manipulate Washington. (The Senate is considering its own tax legislation, which differs from the House bill in several ways.) Compared with middle class Americans, the upper middle class is less likely to see marginal tax rates fall under the House legislation. The bill also limits or scraps entirely some of the group’s favorite tax breaks, especially deductions for state-and-local taxes, and medical expenses, and tax breaks for education.

    If you’re part of the upper middle class and concede you should be paying more, don’t count on wealthier groups making the same sacrifice—at least under the House bill. 

    While a repeal of the alternative-minimum tax helps some people with incomes below $300,000, it’s more likely to benefit those on the higher wealth rungs. The very rich, including President Donald Trump, who has been pressing for a legislative victory before the end of his first year in office, would benefit from a repeal of the estate tax, lower corporate tax rates and a lower “pass-through” rate on business income. The House bill explicitly tries to limit the pass-through benefit for doctors, lawyers, accountants, and other high-earning professionals—traditional denizens of the upper middle class. 

    This all may seem terribly unfair to members of the upper middle class, but there are some provisions they can take solace in. The bill leaves untouched some sweet tax breaks that predominately benefit people with lower six-figure salaries, such as 529 college savings plans and 401(k)s and other retirement perks. The CBO calculates that two-thirds of the government’s costs for retirement tax breaks go to the top 20 percent.

    But beyond these few exceptions, much of the upper middle class will still take it on the chin.

    And maybe they should. Higher taxes on the upper middle class make sense to some liberal tax experts—but only if the proceeds are used the right way, they said, for things like better health care, more affordable college, and rebuilding infrastructure. Under the House bill, though, any new tax revenue is used to offset tax cuts—much of which will benefit the super wealthy and corporations, especially over time.

    “There would be a lot of people in the country who would be willing to chip in for those goals,” said Carl Davis, research director of the left-leaning Institute on Taxation and Economic Policy. In the House plan, however, the upper middle class is “going to pay more for a bill that’s going to grow the national debt, and provide the lion’s share of the benefits to corporations and their shareholders.”

    Riedl, who has advised Republican candidates, argues the upper middle class should get a more generous tax cut under GOP tax reform. “It’s hard to argue the upper middle class is not currently paying its fair share,” he said. Reeves said the U.S. should ultimately tax the upper middle class more—but “the top 5 percent more still.”

    Looking at Republican tax plans, Reeves said, “it’s like they only read half my book.”

      Read more: http://www.bloomberg.com/news/articles/2017-11-20/should-the-upper-middle-class-take-the-biggest-tax-hit

      Senate Passes Tax-Cut Bill in Milestone Move Toward Overhaul

      Senate Republicans narrowly approved the most sweeping rewrite of the U.S. tax code in three decades, slashing the corporate tax rate and providing temporary tax-rate cuts for most Americans.

      The 51-49 vote — achieved just before 2 a.m. Saturday in Washington and only after closed-door deal-making with dissident senators — brings the GOP close to delivering a much-needed policy win for their party and President Donald Trump. 

      After the vote, Trump said on Twitter that he looks forward to signing a final bill before Christmas. Vice President Mike Pence tweeted that a pre-Christmas tax cut would be a “Middle-Class Miracle!”

      Before it goes to Trump, lawmakers will have to resolve differences between the Senate bill and one the House passed last month, a process that could begin Monday. Although both versions share common top-line elements, negotiations on individual provisions inserted to win votes, particularly in the Senate, may be protracted and difficult. The final product will end up being a central issue in the 2018 elections that will determine control of Congress.

      “We’re going to take this message to the American people a year from now,” Senate Majority Leader Mitch McConnell said after the vote.

      Speaking in New York on Saturday, Trump also predicted the tax package would be a winner for Republicans in the 2018 midterm elections. “We got no Democrat help and I think that’s going to hurt them in the election,” Trump said at a fundraising event.

      Read about the sticking points between Senate, House bills.

      Both the House and Senate measures would cut the corporate tax rate to 20 percent from 35 percent — though the Senate version would set that lower rate in 2019, a year later than the House bill would. Also, the Senate bill, unlike the House version, would provide only temporary tax relief to individuals, ending tax cuts for them in 2026. Both bills are expected to add more than $1.4 trillion to the federal deficit over 10 years, before accounting for any economic growth.

      Senator Bob Corker of Tennessee, who had cited concerns over the bill’s effects on federal deficits, was the only Republican dissenter. McConnell rejected revenue scores that suggested the bill’s tax cuts would add to the deficit. He predicted it would be a “revenue producer” by stimulating economic growth. Congress’s official tax scorekeeper this week said otherwise.

      The House and Senate bills also align on the contentious issue of individual deductions for state and local taxes: They’d eliminate all but a deduction for property taxes, which would be capped at $10,000.

      Mortgage Interest

      But they differ on the home mortgage-interest deduction; the House bill would restrict that break to loans of $500,000 or less with regard to new purchases of homes. The Senate legislation would leave the current $1 million cap in place.

      They also differ — narrowly — on the tax rates they’d apply to multinational companies’ accumulated offshore earnings. The House bill would tax those profits at 14 percent for earnings held as cash and 7 percent for less-liquid assets. The revised Senate bill contains a lengthy section that has no direct mention of the rates, but a person familiar with the Senate plan said they’d be 14.5 percent for cash and 7.5 percent for less-liquid assets.

      Senate Republican leaders muscled the sweeping legislation through the chamber less than two weeks after releasing the bill draft. Many GOP lawmakers, including Corker and Lindsey Graham of South Carolina, have expressed concerns that the party has little to show so far before next year’s congressional elections, after the collapse of an Obamacare repeal earlier this year and no action on issues ranging from immigration to infrastructure.

      ‘Working Families’

      Trump expressed gratitude to McConnell and Finance Committee Chairman Orrin Hatch for steering the measure through the Senate.

      “We are one step closer to delivering MASSIVE tax cuts for working families across America,” Trump wrote on Twitter.

      Republicans were able to bring the legislation to a vote using Senate rules that allowed them to approve it with a simple majority, therefore without any Democratic support. The GOP controls just 52 votes in the chamber, eight shy of what’s typically needed to move controversial measures that draw delaying tactics by opponents.

      Narrow Majority

      That narrow majority made it important for Senate leaders to try to hold every member’s vote; moderate Senator Susan Collins of Maine used that leverage to secure various concessions, including an agreement to enhance an individual deduction for large unreimbursed medical expenses through the end of next year. The House bill would eliminate that tax break.

      Democrats decried the bill’s deficit impact and complained they were shut out of the process to help draft the measure. They cited research showing that the legislation primarily benefits the nation’s highest earners and business owners, and will bleed federal revenues in a way that hurts domestic programs.

      “At a time of immense inequality, the Republican tax bill makes life easier on the well-off and eventually makes life more difficult on working Americans, exacerbating one of the most pressing problems we face as a nation — the yawning gap between the rich and everyone else,” said Minority Leader Chuck Schumer of New York during debate on the bill.

      ‘Back of a Napkin’

      Schumer noted that a set of last-minute revisions to the bill changed it in ways that had yet to be analyzed by the Joint Committee on Taxation, Congress’s official scorekeeper for the effects of tax legislation. “Is this really how Republicans are going to rewrite the tax code? Scrawled like something on the back of a napkin?”

      McConnell said the bill, the first text of which was introduced on Nov. 20, went “through the regular order.” He dismissed complaints like Schumer’s. “You complain about process when you’re losing,” McConnell said.

      Attention now shifts to a House-Senate conference committee — a specially appointed, temporary panel that will be charged with hashing out the differences in the bills and preparing a final version for both chambers to consider. Party leaders will select a small group of lawmakers, likely from the House and Senate tax-writing panels in each chamber, who would then be approved by each chamber.

      That work could start as early as Monday, with many high-stakes issues to be worked through. The deadline of Dec. 31 is an artificial one, though — aimed partly at securing a victory well in advance of the 2018 congressional elections. Republicans would have until the end of 2018 before they lose their ability to clear final passage in the Senate without a filibuster.

      Expensing Provision

      Both bills share some key central elements: They both almost double the standard deduction for individual taxpayers while eliminating personal exemptions. They both allow companies to fully and immediately deduct the cost of their spending on equipment for five years. But the Senate version would slowly step down the expensing provision after the five-year period — a feature that the House bill doesn’t provide for.

      Yet there are many differences — ranging from the taxation of business income to the amount set for the child tax credit — and Senate negotiators may have the upper hand during talks. That’s because the wafer-thin two-vote majority in the Senate will make it harder to usher a final bill back through that chamber.

      The House bill would consolidate the current seven individual tax brackets to four, leaving the top tax rate at 39.6 percent. The Senate bill would have seven brackets — with lower rates, and a top rate of 38.5 percent. Studies have shown that many of the tax bill’s benefits would go to the highest earners — and some middle-class taxpayers might actually pay more — a finding that could impact the House-Senate talks.

      The Senate bill includes a repeal of Obamacare’s mandate that most Americans have health insurance or pay a penalty. The House bill does not.

      Pass-Through Businesses

      Senators approved a 23 percent tax deduction — subject to certain limitations — on business income earned from partnerships, limited liabilities and other so-called pass-through businesses. The House version would create a 25 percent tax rate for such business income — with restrictions on which businesses could qualify. Small businesses would get extra relief under the House legislation as well.

      The House bill would also eliminate the estate tax, while the Senate version would limit the tax to fewer multimillion-dollar estates, but leave it in place. And after 2025, the limits would lift.

      Under current law, the estate tax applies a 40 percent levy to estates worth more than $5.49 million for individuals and $10.98 million for married couples. The Senate bill would temporarily double the exemption thresholds. The House bill would double the exemption thresholds, and then repeal the tax entirely in 2025.

        Read more: http://www.bloomberg.com/news/articles/2017-12-02/senate-passes-tax-cut-bill-in-milestone-move-toward-overhaul

        The GOP Tax Plan Is Entering Its Make-or-Break Week

        The $1.4 trillion item on President Donald Trump’s wish list — a package of tax cuts for businesses and individuals that he has said he wants to sign before year’s end — is headed into the legislative equivalent of a Black Friday scrum next week.

        Senate Republican leaders plan a make-or-break floor vote on their bill as soon as Thursday — a dramatic moment that will come only after a marathon debate that could go all night. Democrats are expected to try to delay or derail the measure, and the GOP must hold together at least 50 votes from its thin, 52-vote majority in order to prevail.

        Their chances improved this week when Republican Senator Lisa Murkowski of Alaska said she’ll support repealing the “individual mandate” imposed by Obamacare — a provision that Senate tax writers are counting on to help finance the tax cuts. Murkowski had earlier signaled some reservations about the provision; and her support was widely viewed as a positive sign for the tax bill’s chances.

        Trump is scheduled to address Senate Republicans at their weekly luncheon Tuesday afternoon on taxes and the legislative agenda for the rest of the year, according to a statement from Senator John Barrasso, chairman of the Senate Republican Policy Committee. 

        The White House previously announced that the president would talk with Republican and Democratic congressional leaders at the White House the same day about an agreement on spending to keep the government open after funding expires on Dec. 8. David Popp, a spokesman for Senate Majority Leader Mitch McConnell, and Drew Hammill, a spokesman for House Democratic leader Nancy Pelosi, both said that meeting is still on the schedule.

        If the tax bill clears the Senate — a step that’s by no means guaranteed — lawmakers in both chambers would have to hammer out a compromise between their differing bills, a process that presents potential pitfalls of its own. For now, though, much of the Senate’s attention will focus on its legislation’s price tag.

        Three GOP senators — Bob Corker of Tennessee, Jeff Flake of Arizona and James Lankford of Oklahoma — have cited concerns about how the measure would affect federal deficits. Independent studies of the legislation have found that — contrary to its backers’ arguments — its tax cuts won’t stimulate enough growth to pay for themselves. Both the Senate bill, and one that cleared the House earlier this month, would reduce federal revenue over a decade by roughly $1.4 trillion, according to the Joint Committee on Taxation.

        On Wednesday, a report from the Penn Wharton Budget Model at the University of Pennsylvania said the bill would reduce federal revenue in each year from 2028 to 2033. That finding would mean it doesn’t comply with a key budget rule that Senate Republican leaders want to use to pass their bill with a simple majority over Democrats’ objections.

        Budget Rule

        In essence, that rule holds that any bill approved via that fast-track process can’t add to the deficit outside a 10-year budget window. The JCT has already found that the Senate bill would generate a surplus in its 10th year because it has set several tax breaks for businesses and individuals to expire.

        But JCT hasn’t yet weighed in publicly on the revenue effects in subsequent years. Senate GOP leaders have expressed confidence that their proposal will satisfy the rule ultimately.

        Another potential stumbling block stems from the fact that Congress is trying to act on complex tax legislation under a tight, self-imposed timeline in order to deliver on promises from Trump, House Speaker Paul Ryan and McConnell.

        For example, Republican Senator Ron Johnson of Wisconsin has said he can’t support the current Senate bill because it would give corporations a tax advantage — a large rate cut to 20 percent from 35 percent — that other, closely held businesses wouldn’t get.

        ‘Change the Most’

        His concern centers on the Senate’s plan for large partnerships, limited liability companies, sole proprietorships and other so-called “pass-through” businesses. Under current law, these businesses simply pass their earnings to their owners, who pay income taxes at their individual rates — currently, as high as 39.6 percent, depending on how much they earn.

        Read more: A QuickTake guide to the tax-cut debate

        The Senate bill would provide pass-through owners with a 17.4 percent deduction for income — but in combination with other provisions, that would result in an effective top tax rate for business income that’s more than 10 percentage points higher than the proposed corporate tax rate.

        The House bill would use an entirely different approach, setting a top tax rate of 25 percent for pass-through business income, but then limiting how much of a business’s earnings could qualify for that rate.

        Reconciling those differences — and addressing Johnson’s concern — may be a complicated process. “That’s part of the equation that could change the most over the next few weeks,” Isaac Boltansky, senior vice president and policy analyst at Compass Point Research and Trading LLC, told Bloomberg Tax. “No one is planning around it yet. There is uncertainty across the board.”

        Meanwhile, the Obamacare issue looms in the background — threatening at least one GOP senator’s vote. Susan Collins of Maine said earlier this week that tax bill “needs work,” and “I think there will be changes.”

        The 2010 Affordable Care Act — popularly known as Obamacare — contained a provision requiring individuals to buy health insurance or pay a federal penalty. Removing that penalty in 2019, as the Senate tax bill proposes to do, would generate an estimated $318 billion in savings by 2027, according to the Congressional Budget Office. The savings would stem from about 13 million Americans dropping their coverage, eliminating the need for federal subsidies to help them afford it.

        Because many of the newly uninsured would be younger, healthier people, insurance premiums would rise 10 percent in most years, the nonpartisan fiscal scorekeeper found.

          Read more: http://www.bloomberg.com/news/articles/2017-11-24/trump-s-1-4-trillion-tax-cut-is-entering-its-make-or-break-week

          Repealing Obamacare Mandate Would Save $338 Billion, CBO Says

          Rolling back Obamacare’s requirement that all Americans have health insurance would save the U.S. $338 billion over 10 years, according to the Congressional Budget Office, a smaller benefit than previously projected for a plan favored by the White House.

          Republicans are considering repealing the coverage rule in the Affordable Care Act as a way to pay for far-reaching changes in the tax code. The savings would come from the government spending less to subsidize Obamacare plans as more people opt to forgo health coverage. 

          While ending the mandate could free funds up for a tax overhaul, it would also leave people without health insurance and lead to higher premiums. CBO estimated Wednesday that 13 million more people would be uninsured in 2027 compared with current law if the mandate is repealed starting in 2019. Premiums would increase by about 10 percent in most years of the decade the report covers.

          Both the savings and coverage losses are lower than CBO’s December projection, in part because the non-partisan agency updated the impact from the federal health-insurance subsidies and determined that people and their employers would take longer than it previously thought to make changes to their insurance plans.

          Back in December, CBO said eliminating the mandate would reduce the deficit $416 billion over a decade, and lead to 15 million more people without health insurance. The new number of 13 million doesn’t take into account a decision by President Donald Trump to stop paying cost-sharing reduction payments made to insurers under Obamacare to help Americans afford health costs, CBO said Wednesday.

          Spread Risk

          The mandate is meant to spread risk evenly among healthy and sick people to help keep overall costs down. Without it, healthier people could buy cheaper plans that don’t meet Obamacare coverage requirements, while those who need care, such as people with pre-existing medical conditions, will face rising costs.

          Concerns about people losing coverage doomed a Senate bill that would have ended the mandate while leaving other parts of the ACA intact, known as “skinny repeal,” in July.

          The House Committee on Ways and Means started debate Monday on the tax bill, called the Tax Cuts and Jobs Act. An amendment from Chairman Kevin Brady revised one of the GOP tax bill’s offshore provisions — leading to an estimated $74 billion revenue hole, which is sending tax writers scrambling to find additional revenue.

          Trump backed overturning the mandate in a tweet last week, pushing for the savings generated to be used “for further Tax Cuts.” House Speaker Paul Ryan said on “Fox News Sunday” that GOP leaders are considering the idea.

          CBO’s December estimates covered the 2018 -2026 period. The new projections assume the mandate would be repealed in 2019 and apply to the years 2018 to 2027. The CBO said that it is revising its methods for calculating the effects of repealing the mandate but isn’t including major changes in this analysis.

            Read more: http://www.bloomberg.com/news/articles/2017-11-08/repealing-obamacare-mandate-saves-338-billion-for-tax-overhaul

            Key GOP Senator Susan Collins Lays Out Her Demands for Tax Bill

            Republican Senator Susan Collins of Maine said Monday she’s opposed to two tax breaks for the wealthy that her party leaders are pushing for, indicating that her vote won’t be easy to win on President Donald Trump’s top legislative priority.

            “I do not believe that the top rate should be lowered for individuals who are making more than $1 million a year,” Collins said during an interview with Bloomberg News. “I don’t think there’s any need to eliminate the estate tax.”

            Repealing the estate tax and cutting the individual rate from 39.6 percent for top earners “concern me,” she said, adding that she’s conveyed her opposition to party leaders.

            Collins, a moderate Republican who played a decisive role in thwarting several iterations of Obamacare replacement legislation, offered her most pointed comments on her priorities for a tax bill to date.

            She added that the structure of the estate tax — a 40 percent levy applied to estates worth more than $5.49 million for individuals or $10.98 million for couples — means it avoids hitting “the vast majority of family-owned businesses and farms and ranches.” She said she’s open to adjusting the cutoff level slightly upward.

            The White House and GOP leaders released a tax framework last month that calls for a top individual rate of 35 percent and leaves room for tax committees to add another rate above that. It also proposes the repeal of the estate tax. The House Ways and Means Committee is scheduled to release its version of a tax bill on Wednesday. Collins said the Senate will likely offer a tax bill that differs from the House version.

            Collins’s demands are important because Republicans have only 52 seats in the 100-member Senate and little hope of Democratic support — they can’t afford to lose more than two members to get a bill passed. 

            Still, she said: “There is far more outreach on the tax bill” than there was on health care.

            Collins declined to say she’ll oppose a tax bill that adds to the deficit, in contrast to her colleague Senator Bob Corker of Tennessee. But she said she cares about the debt and doesn’t want the tax bill to “blow a hole” in the deficit. She argued that “certain tax cuts done right will increase economic growth” and produce revenue.

            “I hope very much to be able to support a tax reform package," Collins said. "It’s very difficult — I’m not going to say I can guarantee that because I don’t know what’s going to be in it.”

              Read more: http://www.bloomberg.com/news/articles/2017-10-30/key-gop-senator-susan-collins-lays-out-her-demands-for-tax-bill

              The GOP Tax Plan Is Already Hitting Speed Bumps

              The White House is showing "softness" on ending a $1.3 trillion federal tax deduction filers get for their state and local taxes, Senator Bob Corker said Monday, warning that it raises questions about the GOP’s "intestinal fortitude" and could imperil a tax overhaul.

              The framework that President Donald Trump and Republican leaders released Wednesday calls for deep rate cuts and would abolish existing tax breaks to help pay for them. Without such “pay-fors,” Congress might have to settle for only temporary tax cuts.

              Bob Corker

              Photographer: Zach Gibson/Bloomberg

              Corker, who insists he won’t vote for a tax bill that adds a penny to the deficit, said in an interview that he’s concerned about the early signals from the White House. On Friday — two days after the tax framework was rolled out — National Economic Council Director Gary Cohn said that ending the state and local tax break was negotiable.

              “That’s the easiest one,” said Corker, a Tennessee Republican. “Some of the others are actually more offensive and produce lesser amounts of money.” 

              The budget rules that Senate leaders plan to use to pass the legislation require that any changes that boost the federal deficit would have to expire in time. But the nine-page framework released Wednesday provided few details on revenue raisers. It calls for eliminating deductions, but doesn’t specify them. By showing its willingness to negotiate on one such deduction, the White House appears to be charting a rocky path.

              “As a general matter in tax reform you have to acknowledge that you cannot negotiate with everybody’s single pay-for,” said Doug Holtz-Eakin, who runs the American Action Forum, a conservative group that’s working with GOP leaders on taxes. “If you do that for everything, you don’t get tax reform.”

              ‘New Deficits’

              Ending the state and local deduction, which Trump’s aides proposed in April, faces resistance from Republican lawmakers in high-tax states like New York and New Jersey.

              The same day Cohn commented on the state tax break, tax-writing chiefs Senator Orrin Hatch and Representative Kevin Brady dismissed a study that found ending personal exemptions, another one of the few offsets set forth, could raise taxes for some middle-class families. Their response: The committees haven’t made decisions about which tax breaks to end.

              Asked if the state tax break and personal exemptions were negotiable, Brady reiterated Monday the bill is a work-in-progress. "We’re continuing to work on the final design of the tax reform plan that we’ll have ready after the budget is completed,” he said.

              White House Budget Director Mick Mulvaney is signaling similar flexibility, saying on CNN Sunday that decisions about deductions remain up in the air as “the bill is not finished yet.” He took it a step further on Fox News Sunday, by adding that a tax plan that doesn’t add to the deficit won’t spur growth.

              “I’ve been very candid about this. We need to have new deficits because of that. We need to have the growth,” Mulvaney said. “If we simply look at this as being deficit-neutral, you’re never going to get the type of tax reform and tax reductions that you need to get to sustain 3 percent economic growth.”

              GOP leaders have been laying the groundwork to get tax legislation through the Senate without Democratic support. They need 50 votes to pass a bill, and hold 52 seats, leaving little margin for error.

              $2 Trillion Cost

              Republican leaders have insisted they want a permanent overhaul, similar to the scope of the changes enacted under President Ronald Reagan in 1986. “I want it to be the right kind of bill,” Hatch said. Asked what his biggest challenge would be in getting a tax bill across the finish line, the Utah Republican quipped, “fellow senators.”

              In line with the White House, a growing number of GOP members, such as Senator Rand Paul of Kentucky and Representative Jim Jordan of Ohio, have said they prefer tax cuts that would stimulate growth, even if they add to the deficit.

              Corker has said he’d consider the budget effect of economic growth that results from tax cuts as long as it’s based on reasonable modeling. Senator Mike Crapo, an Idaho Republican, told reporters Tuesday that he also wants a tax plan to be deficit neutral when it’s evaluated using a reasonable dynamic score. Unlike Corker, Crapo didn’t pledge to vote against a tax bill that would add to the deficit when it’s dynamically scored.

              “This is going to make health care look like a simple thing to do,” Corker said, referring to a tax bill. The GOP has faced a months-long, wrenching fight to repeal the 2010 Affordable Care Act, which ultimately failed on the Senate floor.

              “This bill when it comes out of the House and Senate will increase the deficit,” said Steve Bell, a former Senate Republican staff director. “That’s going to be a stumbling block for some people.”

              Eliminating state and local deductions along with personal exemptions would generate about $2.9 trillion in revenue over a decade, according to an analysis by the Urban-Brookings Tax Policy Center. Even with those offsets, the framework is more than $2 trillion in the red, according to estimates by the TPC and Committee For a Responsible Federal Budget.

              Separate Bills

              Despite the unified framework that enjoyed broadly positive reviews from within the party last week, the House and Senate are still likely to pass separate tax bills, according to Senator Pat Toomey, a Pennsylvania Republican. Then, they’ll have to be merged into one bill in a conference committee that can pass both chambers.

              Congress has a Dec. 8 deadline to keep the government funded, which threatens to distract from the tax debate. With just 35 legislative working days left this year, some congressional Republican aides privately have said the issue could get pushed into 2018, an election year.

              Trying to reconcile two bills could highlight the different agendas in each chamber. One example: House GOP leaders have pushed to allow companies to immediately write off their capital expenditures while eliminating the deductions they take when they pay interest on loans. Hatch has backed a corporate integration plan to revamp the business taxation system that would incentivize companies to pay dividends to investors.

              The tax-writing committees in the two chambers may also disagree over whether to tax top earners at a rate above 35 percent — as they’ve been given the power to do under the framework — or how to follow through on the promise to provide the middle class with a tax cut.

              Senator John Thune of South Dakota said Republicans are committed to maintaining a progressive tax code and the tax-writing panels will have to “ensure the people on the high end, as the president has said, aren’t getting a big tax cut.”

              That won’t be easy. The framework includes tax breaks for some top earners by creating a new rate of 25 percent for pass-through businesses — down from 39.6 percent. It also repeals the Alternative Minimum Tax and estate tax, which hit high earners and the wealthy, respectively. The Tax Policy Center’s analysis last week found that about half the plan’s tax breaks would go to the highest earners. GOP lawmakers said the study was flawed because it presumed details that they haven’t yet decided to include in legislation.

              ‘Army of Lobbyists’

              Paul, a Kentucky libertarian who’s never an easy vote to win over, has been critical of the tax plan. He posted a message on Twitter Monday saying: “This is a GOP tax plan? Possibly 30% of middle class gets a tax hike? I hope the final details are better than this.”

              Thune said there have been discussions about having a “top-end surcharge” of more than 35 percent on the highest incomes to mitigate the high-end tax break. Hatch cast doubt on the prospect, saying he prefers to limit it to three brackets, but hinted that political pressure could motivate the White House to add a fourth one.

              “If they get beaten up enough, they might want to,” Hatch said.

              Across Washington, lobbyists of all stripes have been waiting for months to see tax details and keeping their powder dry until full details are revealed — suggesting that ready-made opposition awaits actual tax legislation.

              The real estate industry opposes doubling the standard deduction, arguing that it would lead to fewer people itemizing deductions and therefore diminish the value of the mortgage interest deduction. Charities also oppose it, saying it lessens the use of the deduction for charitable giving. They’re also concerned about the prospect of ending the estate tax, which they argue drives millions of dollars in charitable contributions.

              Corker warned that raising trillions of dollars to pay for the individual and business tax cuts will require making “very tough decisions” that’ll be made tougher “when the army of lobbyists roll in here” to protect their treasured carve-outs.

                Read more: http://www.bloomberg.com/news/articles/2017-10-03/white-house-accused-of-softness-as-tax-plan-hits-early-bumps