Senate Begins Tax Debate by Elbowing Democrats on Perks for Rich

  • Party-line vote defeats measure to cut tax breaks for wealthy
  • Budget jockeying precedes vote to help fast-track tax bill

Sen. Toomey: Confident in Budget Resolution Votes

Senate Republicans kicked off their tax debate Wednesday by killing two Democratic proposals that sought to draw a line against tax breaks for the wealthy.

A provision to prevent cuts to Medicaid and reduce any tax breaks the wealthy might receive was defeated by a party-line vote of 51-47. A second amendment to bar tax cuts for the top 1 percent of earners was also shot down by a vote of 52-46; North Dakota’s Heidi Heitkamp was the only Democrat who voted against it.

A Heitkamp aide said the senator was concerned the language in the amendment was overly broad and could affect taxes on some businesses rather than just individuals.

The sharp divisions came as part of the congressional process to approve a budget resolution -- a critical step needed to allow the GOP to pass a tax bill with just 50 Senate votes. Republicans, who control 52 seats in the chamber, have a slim margin for error as they try to seize on President Donald Trump’s last best chance for securing a major legislative achievement this year. As with their failed effort to replace the 2010 Affordable Care Act, three defections would kill their tax bill unless they gain Democratic votes.

The amendments proposed Wednesday reveal Democrats’ strategy to paint the tax overhaul as a giveaway to the wealthiest Americans. Senator Jeff Merkley, an Oregon Democrat, called the vote against the 1 percent amendment “shameful.” But Republicans are anxious for a legislative win.

“We need to get this done by Thanksgiving,” said Senator John Kennedy of Louisiana. “Period.”

‘Great Negotiator’

Still, Republicans have differences on how to tax upper earners that could resurface during a debate of the actual legislation. While most GOP lawmakers want to reduce rates across the board, Senator Susan Collins of Maine said she’s supportive of a surtax on people who make more than $1 million. She said the 1 percent measure, offered by Senator Bernie Sanders of Vermont, set the threshold too low. In 2014, the top 1 percent included individuals who made at least $465,626.

“If he had offered it as a millionaires and billionaires tax, then he would’ve had my vote,” Collins said.

The final budget vote, slated for Thursday or early Friday, is expected to succeed, albeit narrowly. After a budget’s approved comes the hard part -- drafting a tax bill, passing it through committee, then through the full Senate, and combining it with a House version into one. Many tax details remain unknown, including where Republicans will set the individual income-tax brackets. The GOP framework released Sept. 27 called for across-the-board tax cuts, balanced with many unspecified revenue-raisers.

Senator Claire McCaskill, a Missouri Democrat facing re-election in 2018, said the Republican framework is a “nonstarter” for her because the elimination of tax breaks, such as personal exemptions, could affect lower earners with large families in her state. She also criticized the rate cut from 39.6 percent to 25 percent for “pass-through” entities -- including partnerships and limited liability companies -- as mostly benefiting the wealthy.

McCaskill said she needs more details on what the GOP is proposing, and told Trump during a bipartisan meeting Wednesday, “Mr. President, you’ve got a deserved reputation for being a great negotiator. Would you ever negotiate when you have no idea what the other side is proposing?”

‘Stifling Tax Policies’

Non-controversial amendments were proposed Wednesday by Collins, seeking to boost small business, and by Senator Dean Heller of Nevada, floating a family tax credit -- they passed unanimously. Although they’re vague and non-binding, the amendments to the budget provide a window into the priorities of Senate members ahead of the tax debate.

The votes came hours after after Trump told Republicans and Democrats on the Senate Finance Committee that he didn’t want to benefit from a tax bill, according to an aide briefed on the meeting. But Democrats were skeptical. Senator Ron Wyden, the ranking member on the Finance Committee, said he conveyed that there is “an enormous chasm between the rhetoric and the reality of the Trump tax plan.”

More amendments are slated for Thursday, and Democrats intend to force votes on matters such as requiring Trump to release his tax returns, preserving deductions for state and local taxes and mortgage interest payments, barring middle-class tax increases, and preventing a tax bill from increasing the deficit. Some of the measures could split off senators who say they don’t want tax changes to add to the debt, such as Senator Bob Corker of Tennessee, or others who say nobody in the middle class may see a tax hike, such as Senator Rand Paul of Kentucky.

Republicans also plan on proposing amendments, including measures calling for cutting the state and local deduction, which primarily benefits high earners in Democratic-leaning states, and providing tax relief to farmers and ranchers.

GOP members have said they’re eager to take the next step on taxes after dealing with the budget.

“It is crucial that Congress approve this fiscal framework in order to eliminate the dated and stifling tax policies that are holding back our nation,” said Senator Mike Enzi of Wyoming, the chairman of the Budget Committee.

— With assistance by Steven T. Dennis

    Before it's here, it's on the Bloomberg Terminal.