(Bloomberg) – Revisions to the Senate Republican’s tax-overhaul plan would create heftier upfront tax breaks for the middle class and small businesses -- and then wipe them off the books by 2026.
But a proposal to cut the corporate tax rate to 20 percent from 35 percent in 2019 would be permanent. In all, the changes bring the plan in line with the Senate’s tight fiscal constraints, but may create complications for President Donald Trump and others who have pitched the plan as benefiting the middle class.
The revised Senate measure would also eliminate the Obamacare law’s requirement that individuals have health coverage -- a provision that would save the federal government more than $300 billion over 10 years but leave millions of Americans uninsured, according to the Congressional Budget Office.
The Senate measure will contain major departures from a House bill that GOP leaders have now prepared for a floor vote as early as Thursday. The chambers would have to reconcile differences in their bills before they could become law.
In the House, the Rules Committee decided in a late-night session to not accept any of the 139 amendments offered to the House tax bill. Amendments will also not be allowed on the House floor during debate, which will start Wednesday.
The House will have a 1-hour debate on the rule for the tax bill, and then begin four hours of debate on the bill itself. The vote is still expected on Thursday, Rules Committee chairman Pete Sessions said.
In the Senate, the late-night changes that Finance Chairman Orrin Hatch made to his tax plan appear to have achieved a crucial feat: reducing its long-term costs. The new plan would add $1.4 trillion in deficits over the next decade -- but it would reduce the deficit by $30 billion in 2027. That’s key for adhering to the Senate’s “Byrd rule,’’ which requires that the tax bill can’t add to deficits after 10 years in order to benefit from fast-track budget procedures.
Repealing Obamacare’s so-called individual mandate would save the federal government $318 billion over 10 years, according to an estimate by Congress’s Joint Committee on Taxation. Senator John Thune of South Dakota, the chamber’s third-ranking GOP leader, said the benefit of those savings would go to middle-income taxpayers.
“It’ll be distributed in the form of middle-income tax relief,” he said, according to a statement distributed by Senate Majority Leader Mitch McConnell’s office.
However, after 2025, reductions in tax rates, a doubling of the standard deduction and a major tax break for small pass-through businesses would be set to expire under the changes revealed Tuesday night. A new proposal to double the child tax credit to $2,000 would also expire by then.
Meanwhile, Democrats responded to the Obamacare provision with derision, saying Senate Republicans were financing tax cuts for the rich by taking health coverage away from millions of people.
“This is a con job on the American people and proves that Republicans’ only agenda is putting an economic double standard into black letter law,’’ said Senator Ron Wyden, the top Democrat on the Senate Finance Committee.
Injecting the divisive Obamacare issue into the tax debate carries risks for Republicans, who were unable to forge workable repeal-and-replace legislation this year despite years of campaign promises.
But the revised tax plan appears to contain a strategy for smoothing over such differences. It contains numerous provisions targeted at particular industries or geographical areas -- a not uncommon method for attempting to shore up votes.
For example, there’s a provision aimed at helping Alaska Native Corporations. Alaska is home to key moderate Republican Lisa Murkowski. Other provisions were more broadly drawn and designed to appeal to the middle class, including the $2,000 tax credit for children -- earning plaudits from Senators Marco Rubio of Florida and Mike Lee of Utah.
Senators had tried to make at least the corporate rate cut permanent in hopes that would boost economic growth. That in turn is a key to justifying their near-unanimous belief that despite a score of more than $1.4 trillion in higher deficits the bill would ultimately pay for itself. Some economic analyses have taken issue with that view. -- John Voskuhl, Sahil Kapur, Steven T. Dennis, Anna Edgerton and Erik Wasson
What to Watch on Wednesday:
· The Senate Finance Committee will begin its markup at 10 a.m. and is expected to debate Hatch’s modified proposal. The panel concluded its heated markup on Tuesday around 3:30 p.m. after Wyden said: “We’ve had it for the day.” The Oregon lawmaker told Hatch to expect “a lot of questions” from Democrats.
· Reactions among GOP lawmakers to sunsetting tax changes for individuals.
· Senate Democratic Leader Chuck Schumer and House Democratic Leader Nancy Pelosi are scheduled to hold a rally protesting the GOP tax bill.
The House will begin floor debate on the rule governing the House floor vote.