Senate Votes to Begin Debate on Tax Overhaul: Tax Debate Update

Updated on
Nine GOP Senators Still Wavering on Tax Overhaul

The Senate tax bill is headed for a marathon debate this week as Republican leaders brought the measure to the floor Wednesday and could hold a final vote as early as Thursday. Here are the latest developments, updated throughout the day:

Senate Votes to Begin Debate on Tax Overhaul (6:42 p.m.)

Senate Republicans voted to begin debate on their sweeping tax-overhaul bill that would cut rates for businesses and individuals -- touching off a process that could produce an up-or-down vote before the end of this week.

Senators approved the “motion to proceed,” 52-48, on party lines. The tally doesn’t necessarily signal that Republican leaders have the 50 votes they’ll need for final passage, but it means they’ve cleared yet another hurdle in their sprint to send legislation to President Donald Trump before the end of this year.

If Senate Republicans can approve a bill this week, they’ll next have to hammer out compromise legislation with the House, which approved its own package of tax changes earlier this month.

Wednesday’s vote to proceed came only after GOP senators hashed out various compromises with their leaders, including one that would create a more generous tax break for partnerships, limited liability companies and other so-called pass-through businesses.

Republican Senator Steve Daines of Montana said the compromise would increase a deduction for business income from pass-throughs to 20 percent from 17.4 percent.

GOP 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. One option would be a stop-gap spending bill needed to keep the government open past a Dec. 8 deadline.

The Senate tax bill would repeal the Obamacare law’s individual mandate that requires people to have health insurance -- a move that congressional analysts say could leave millions of people uninsured and lead to higher coverage premiums.

Collins had said previously that she didn’t think the Obamacare provision should be included in the tax bill. Her vote to begin debate doesn’t guarantee that Senate leaders will have the requisite 50 votes to secure final passage, but it’s considered a good sign.

Another provision -- to insert a revenue trigger into the bill that would raise taxes if the package of tax cuts doesn’t stimulate sufficient economic growth to meet revenue targets -- had yet to surface in its final form before the vote began. GOP Senators have discussed a provision that would allow for as much as $350 billion in automatic tax increases starting in 2022.

Senate Finance Chairman Orrin Hatch said tax writers “aren’t there yet” in terms of sharing details on how the provision would look. Senator Bob Corker, one of the GOP lawmakers who’s seeking a trigger, said lawmakers are still working on the provision.

The bill itself got an important commitment Wednesday as GOP Senator Lisa Murkowski of Alaska said she will vote for the measure. Her decision came despite the fact that part of the bill that would open the Arctic National Wildlife Refuge to oil drilling -- a provision widely viewed as an inducement for her vote -- encountered a holdup over an arcane budget rule.

Murkowski told reporters Wednesday evening that she’s confident the provision will survive any procedural challenges. -- Erik Wasson, Laura Litvan and Steven T. Dennis

Trump Says Overhaul Will Cost Him a ‘Fortune’ (4:36 p.m.)

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.

“It’s going to cost me a fortune, this thing. Believe me, believe me,” Trump told a rally in St. Charles, Missouri. “This is not good for me.”

Trump added: “I have some very wealthy friends. Not so happy with me.”

The Congressional Research Service concluded that under the Senate Republican tax plan, Americans making between $500,000 and $1 million a year would see the biggest percentage increases in their after-tax income.

The Congressional Budget Office, lawmakers’ official arbiter on the financial impact of legislation, found that the Senate bill as written would provide less benefit from federal spending to the poorest taxpayers -- those earning less than $30,000 a year -- as early as 2019. By 2021, all income groups making less than $40,000 a year would be net losers, according to Sunday’s CBO report. It also shows people from $50,000 to $75,000 facing additional costs by 2027.

Trump said a typical family of four would see its annual taxes cut by $2,000 under the tax plan.

“You’re going to take that $2,000 and maybe you’ll save some and you’ll spend some,” Trump said.

Trump departed from roughly 40 years of tradition for presidential candidates by refusing to release his tax returns during the 2016 campaign. The president has said he’s under a federal audit and won’t release his returns until the audit is over. Democrats have called for Trump to release his returns to see how he would fare under a tax revamp.

Stocks started the day higher on speculation the Senate would pass corporate tax cuts, with banks pacing gains on bets that industry will benefit most. The Senate was expected to vote Wednesday to begin debate on the bill -- a process that may lead to a floor vote on Thursday or Friday. -- Toluse Olorunnipa and Justin Sink

Senators Reach Pass-Through Deal, Daines Says (3:49 p.m.)

Senate Republicans have agreed to raise a proposed deduction for pass-through businesses, such as partnerships and limited liability companies, to 20 percent, according to Republican Senator Steve Daines of Montana.

Daines, along with GOP Senator Ron Johnson of Wisconsin, have pushed for larger tax cuts for pass-through businesses.

“There has been some good progress for Main Street businesses in the tax cut bill,” Daines said in a statement. He said those businesses would see $60 billion in tax cuts as a result of moving the deduction to 20 percent from 17.4 percent, as originally proposed in the Senate bill.

Daines said he had also secured a tax provision that would allow U.S. domestic companies that have export sales to foreign customers to reduce their tax burden.

“I’ve seen enough progress to vote yes to move the debate forward,” Daines said. -- Erik Wasson

Trump Opposes Rubio’s 22% Corporate Rate Call (2:19 p.m.)

President Donald Trump doesn’t support a proposal to pay for expanding the child tax credit by setting the corporate income tax rate at 22 percent, according to Raj Shah, a White House spokesman.

The White House supports the child tax credit, but “we also think that it’s important to make businesses more competitive,” Shah told reporters during an Air Force One flight to Missouri, where Trump is scheduled to give a speech on taxes.

GOP Senators Marco Rubio of Florida and Mike Lee of Utah on Wednesday proposed amending the Senate tax bill to enhance the child tax credit. As written, the bill calls for boosting the child tax credit to $2,000 for each child under 18. Currently, the credit provides $1,000 for each child under 17. The bill would also make the benefit available to families with higher incomes.

The Rubio-Lee amendment would make it refundable against a family’s payroll tax liability -- which would help lower income families that otherwise wouldn’t make enough money to claim the credit.

Trump has said previously that he won’t accept a corporate tax rate higher than 20 percent. -- Toluse Olorunnipa

Senate Finance Chairman Says Trigger is Likely (12:57 p.m.)

Senate Finance Chairman Orrin Hatch said it’s likely that a revised tax bill will include a fiscal trigger that would impose tax increases if revenue targets aren’t met.

“We are probably going to have one but I prefer not having it,” Hatch told reporters Wednesday. “It depends on how the bill is written. There’s a way I would support it.”

Senate Republicans are discussing adding a provision to their tax bill that could trigger up to $350 billion in automatic corporate tax increases over 10 years beginning in 2022, according to two people briefed by congressional staff members on the plan. A third person familiar with the emerging proposal confirmed the details.

Republican senators including Bob Corker of Tennessee and James Lankford of Oklahoma have sought the trigger provision as a way to prevent the tax cuts in the Senate bill from increasing federal deficits. -- Erik Wasson

Senators to Propose Enhanced Child Tax Credit (12:34 p.m.)

Republicans Senators Marco Rubio and Mike Lee plan to introduce an amendment to the Senate tax bill 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 Senate tax bill calls for boosting the child tax credit to $2,000 for each child under 18. Currently, the credit provides $1,000 for each child under 17. It would also make the benefit available to families with higher incomes. The left-leaning Center on Budget and Policy Priorities has estimated that the Senate’s current proposal would amount to $75 or less of help for low-income families, in part because of the limits on the credit’s refundability.

The Rubio-Lee amendment would make it refundable against a family’s payroll tax liability -- which would help lower income families that otherwise wouldn’t make enough money to claim the credit.

“Right now, 70 percent of the tax cuts we’re considering would go to businesses, and only 30 percent to individuals,” Rubio of Florida and Lee of Utah said in a joint statement. “This amendment would level the playing field for families, while still kick-starting national investment and growth.”

The Senate bill also would cut the corporate tax rate to 20 percent from 35 percent, and Trump has said the 20 percent figure is non-negotiable. The bill already delays the effective start date of the corporate rate cut to Jan. 1, 2019.

Moving the corporate rate any higher “is not a policy I would support,” said Senator Pat Toomey, a Pennsylvania Republican.

Senate Majority Leader Mitch McConnell’s aides have said fundamental transformations to the tax bill won’t be considered. Senators who want to see additional tax cuts or to restore particular tax breaks will be allowed to file amendments that contain mechanisms to pay for their plans, a person familiar with the discussions said earlier this week. -- Alexis Leondis

Tillis, Heller and Perdue Among Those Concerned (11:39 a.m.)

Senator Thom Tillis of North Carolina said the idea of a fiscal trigger that would impose tax increases if a proposed tax overhaul doesn’t meet revenue targets is “well-intentioned” but not necessary and potentially harmful to the underlying goal.

“If we put a trigger in there that can potentially say sometime over the horizon in 10 years your taxes can increase, then the markets will not respond as favorably,” Tillis told reporters. But he stopped short of saying he’d vote “no” on a bill that included a trigger.

The Republican senator said the provision would “narrow the horizon” for business investment by creating uncertainty. “The perverse consequence of having a trigger in here is that you won’t achieve the economic growth you otherwise would,” he said.

Senate Republicans are discussing adding a provision to their tax bill that could trigger up to $350 billion in automatic corporate tax increases over 10 years beginning in 2022, according to two people briefed by congressional staff members on the plan. A third person familiar with the emerging proposal confirmed the details.

Republican senators including Bob Corker of Tennessee and James Lankford of Oklahoma have sought the trigger provision as a way to prevent the tax cuts in the Senate bill from increasing federal deficits.

Tillis’s concerns about the provision are similar to those raised by Republican Senator John Kennedy of Louisiana on Tuesday afternoon. Kennedy initially said he wouldn’t vote to implement automatic tax increases on the American people -- though he later said he’d keep an open mind.

Tillis said he’d prefer that any trigger work both ways -- so if there were more economic growth than expected, additional tax cuts would result.

GOP Senator Ted Cruz of Texas said Tuesday he didn’t like the revenue trigger either, but if it’s needed to get to 50 votes in the Senate, then he also wants it to apply two ways -- bringing additional cuts if there’s robust growth. Cruz said his staff is working on writing such a provision.

“I think there would be significant support for a trigger that if that growth materializes, if federal revenues are going up, that taxes, especially individual taxes, would be even further reduced,” Cruz said.

Republican Senator Dean Heller of Nevada also said Wednesday he doesn’t like the notion because it would take away certainty for businesses. Senator David Perdue of Georgia said he doesn’t like the idea either, but doesn’t want to hold up the tax bill and is hoping to find common ground.

“Perfection is not on the cards on this,” Perdue said. “It never has been.”

House Ways and Means Chairman Kevin Brady told reporters that he would refrain from expressing a view on the trigger proposal in order to allow the Senate to have room to negotiate its bill. -- Sahil Kapur, Kaustuv Basu, Erik Wasson and Steven T. Dennis

Hurdles Remain in Gathering 50 Senate Votes (4:00 a.m.)

The $1.4 trillion tax-cut measure gained momentum when the Budget Committee voted Tuesday to send it to the Senate floor. The next step Wednesday may be a procedural vote to begin debate -- but success on that doesn’t guarantee the bill will have enough votes for final passage.

President Donald Trump told reporters Tuesday that there will be changes to the legislation. The bill is “going to have lots of adjustments before it ends, but the end result will be very, very massive,” he said.

Republicans need to secure at least 50 votes from their 52-48 majority to pass the bill.

“Every little thing is a worry. We can’t afford to lose more than two. We are very concerned about it," Senate Finance Committee Chairman Orrin Hatch of Utah said.

Leaders are focusing on two key GOP factions: Senators Bob Corker of Tennessee, James Lankford of Oklahoma and Jeff Flake of Arizona are concerned about increasing the deficit, while Ron Johnson of Wisconsin and Steve Daines of Montana want larger tax cuts for pass-through businesses.

The Budget Committee approval came after Corker said he’d been promised a deficit trigger intended to increase taxes in case of large revenue shortfalls even when considering economic growth. Details of the trigger haven’t been released, though, and some senators are ready to oppose it if they think it threatens future growth. They argue an automatic tax increase linked to a lagging economy could exacerbate a recession.

Corker also acknowledged that the provision may violate a Senate budget rule that says reconciliation bills, such as the tax measure, can’t contain provisions that lack a fiscal effect. The Congressional Budget Office may be unable to analyze a provision based on a hypothetical level of future revenue, according to budget expert Bill Hoagland.

On the pass-through issue, Daines told reporters that details may emerge Wednesday on changes intended to level the playing field between corporations and pass-through businesses, such as partnerships and limited liability companies, that pay taxes under individual rates. A possible solution could increase the deduction for pass-throughs above the Senate bill’s 17.4 percent level.

Senate Republicans are giving serious consideration to boosting the deduction to 20 percent -- a figure that Johnson has cited -- said a person familiar with their discussions.

Republican Senator Susan Collins of Maine also continues to negotiate proposed changes to the legislation, including keeping a deduction for state and local property taxes and a higher top tax rate for individuals.

If Republicans can resolve those issues, the Senate would be on track for a lengthy debate on amendments Thursday and final passage of the bill late Thursday or early Friday. -- Erik Wasson and Kaustuv Basu

What to Watch on Wednesday:

  • GOP leaders plan to bring the tax measure to the Senate floor with a vote on a motion to proceed. 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. A final vote is expected Thursday or Friday, barring a significant setback.
  • Tax writers may release details of a trigger provision sought by Corker to raise taxes in case of government revenue falls short of expectations. Corker said Tuesday that leaders appeared to have agreed to his demand.
  • The nonpartisan Joint Committee on Taxation said it is trying to complete a “dynamic scoring” analysis of the bill’s effect on the deficit by late Wednesday.

Here’s What Happened on Tuesday:

  • Trump met with the Senate GOP behind closed doors in what the president later called “somewhat of a lovefest.” He addressed concerns raised by holdouts including Johnson and was “very respectful to him and to others,” said Senator Mike Rounds of South Dakota.
  • The Senate Budget Committee voted 12-11 to send the bill to the floor for a vote after Corker and Johnson of Wisconsin put aside their objections. Johnson has expressed concern that that the bill doesn’t provide enough of a tax break for pass-through businesses compared with corporate competitors.

— With assistance by John Voskuhl, Erik Wasson, Kaustuv Basu, Sahil Kapur, Steven T. Dennis, Margaret Talev, Toluse Olorunnipa, and Justin Sink

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