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Tax reform roadblocks emerge in Senate

Sen. Ron Johnson (right) has already said he won’t vote for the proposal because of how it treats small businesses. Sens. Bob Corker (center) and Jeff Flake (left) are worried the plan will cost far more than advertised. | Pablo Martinez Monsivais/AP

Sens. John McCain and Lisa Murkowski have been wildcards, avoiding taking a public position on the proposal.

Republicans were able to muscle their tax-rewrite plan, through the House exactly two weeks after it was unveiled, but they are already facing far tougher sledding in the Senate.

GOP leadership is confronting mushrooming demands from individual senators with much more power to bollix up the tax plans, thanks to the party’s super-thin majority.

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Sen. Ron Johnson (R-Wis.) has already said he won’t vote for his colleagues’ proposal because of how it treats small businesses, leaving Republicans with just one vote to spare when the plan hits the Senate floor after Thanksgiving.

Deficit hawks like Sens. Bob Corker (R-Tenn.) and Jeff Flake (R-Ariz.) are worried the plan will cost far more than advertised thanks to its liberal use of “temporary” tax provisions that will likely be eventually extended, and say they are working on changes to bring down the cost.

Moderate Susan Collins (R-Maine) has her own concerns, including with plans to repeal the Affordable Care Act’s individual mandate to have health insurance as part of tax reform.

Others like Sens. John McCain (R-Ariz.) and Lisa Murkowski (R-Alaska) have been wildcards, avoiding taking a public position on the proposal.

Murkowski told Roll Call on Thursday that if lawmakers are going to repeal the individual mandate as part of the tax plan, they “absolutely” must pass separate health legislation aimed at stabilizing health care markets and controlling costs.

“If that tax cut is offset by higher premiums, you haven’t delivered [a] benefit,” she told the newspaper.

McCain praised the Finance Committee, which approved a draft of the plan last night, for “taking another step forward in providing much-needed tax relief,” while also serving notice that he wants plenty of time to offer amendments when the plan reaches the Senate floor.

House Republicans have their own red lines, warning a Senate proposal to end a long-standing deduction for state and local taxes is a nonstarter with their colleagues.

Democrats, meanwhile, have been teeing off on the plan, especially after the official Joint Committee on Taxation said Thursday that while everyone’s taxes would initially go down under the plan, some middle-income people would eventually see tax increases.

Senate leaders acknowledge they have their work cut out for them, with Majority Whip John Cornyn singling out the small business issue as “particularly challenging.”

“We still have quite a bit of work to do there,” he said Thursday night, as the Finance panel wrapped up its consideration of the plan. “This is still just the beginning of the legislative process.”

President Donald Trump is pictured. | AP

The result is there could still be substantial changes to the proposal in the Senate in the coming weeks. That risks dragging lawmakers further away from the “Big Six” framework that was designed to keep the House and Senate on the same page, and avoid a repeat of the Obamacare repeal debacle, when the House approved a plan only to watch the whole effort collapse in the Senate.

Senate Majority Leader Mitch McConnell (R-Ky.) said he will bring the plan before the entire Senate when lawmakers return from a week-long Thanksgiving recess. Their plan cleared the Finance committee last night on a party-line vote after four days of often testy debate, during which Republicans made major changes to the plan while killing dozens of Democratic amendments.

The House cleared a competing draft Thursday on a 227-205 vote. Republicans aim to get a compromise plan to President Donald Trump’s desk by the end of the year.

Corker said Thursday that he and other lawmakers are working on changes aimed at bringing down the cost of the Senate, now pegged at $ 1.4 trillion.

Tax Reform: A Guide to Loopholes

POLITICO’s Morning Tax author, Bernie Becker, explains tax reform and what makes the issue so complicated, focusing on loopholes and deductions.

They’re worried the bill includes more than 35 temporary provisions that Congress has no intention of actually allowing to ever expire, ballooning the cost far beyond it’s supposed sticker price. He declined to discuss specifics.

“There are several of us that are trying to figure out a way to make sure this doesn’t hurt us relative to deficits,” he said Thursday. “We’re looking globally at the whole thing and trying to do what we can to make it more fiscally palatable.”

That will be difficult to address, with the nonpartisan Committee for a Responsible Federal Budget estimating the Senate plan includes a whopping $ 515 billion in budget gimmicks aimed at artificially reducing its cost.

Another vexing issue will be dealing with small businesses and other so-called pass throughs, whose owners pay taxes on their business’s earnings through the individual side of the tax code. To the consternation of Johnson and others, those companies would pay higher taxes than corporations under the Senate plan. Republicans have been struggling for months to come up with a plan to allow pass-throughs to tap their lower proposed business tax rate without creating a loophole for the wealthy to avoid paying taxes.

“I know that there are members that have concerns about that,” said Sen. John Thune, the chamber’s No. 3 Republican.

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