Senate Passes Major Business, Individual Cuts: Tax Debate UpdateBloomberg News
The Senate tax bill is in the midst of a marathon vote session that stretched into early Saturday morning with the goal of holding a final vote in the next several hours. Here are the latest developments, updated throughout the day:
Senate Passes Major Business, Individual Cuts (1:51 a.m.)
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 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. Trump has promised to sign tax-cut legislation before the end of 2017.
Banks Would Get Rate Hike on Overseas Levy (12:43 a.m.)
Banks and securities dealers would face higher rates than other companies for a new tax aimed at preventing multinational corporations from sending taxable income overseas to low-tax or no-tax jurisdictions, under changes proposed to the Senate tax bill on Friday.
The new tax, called the “base erosion and anti-abuse tax,” or BEAT, would apply to certain payments that U.S. companies make to overseas units, including loan payments.
The initial Senate bill would have assessed the tax at 10 percent, a rate that would grow to 12.5 percent in 2026. The amended version would set those rates at 11 percent, growing to 13.5 percent, for “certain banks and securities dealers.”
Michael Mundaca, co-leader of the Ernst & Young Americas Tax Center and a former top Treasury tax official, confirmed the substance of the change’s language. -- Lynnley Browning
Bill Tab Grows $30 Billion in 11th-Hour Score (12:04 a.m.)
Revisions made to the Senate tax bill to help shore up GOP senators’ votes added roughly $32.5 billion to its 10-year cost, according to a one-page document posted late Friday night by the Congressional Budget Office.
CBO, one of Congress’s official scorekeepers, said the revised bill would add roughly $1.4467 trillion to federal deficits over a decade. A previous version of the bill was estimated by the Joint Committee on Taxation to add about $1.4142 trillion to deficits.
Friday night’s score, which was released shortly before midnight, doesn’t account for any macroeconomic effects. JCT found on Thursday that, even after considering any economic growth it might prompt, an early version of the Senate bill would add about $1 trillion to federal deficits over 10 years. -- John Voskuhl
Senate GOP Rejects Rubio-Lee Child Tax Credit (11:08 p.m.)
Republicans voted down a tax amendment from Senators Marco Rubio and Mike Lee to expand the bill’s child tax credit and pay for it by setting the corporate tax rate at 20.94 percent rather than 20 percent.
Rubio, a Florida Republican, made an impassioned plea for the provision, which would make the credit refundable against payroll taxes, as a way to help struggling Americans in exchange for a slice of corporate taxes.
“These are teachers, firefighters, welders, construction workers, the working class,” Rubio said on the Senate floor “They need our help.”
Lee, a Utah Republican, called it an "eminently reasonable request," saying the corporate tax change is "slight," but "that minor difference would make all the difference in the world to America’s moms and dads."
The amendment was defeated by a vote of 71 to 29.
The decision to prioritize a lower corporate tax is a politically awkward move by a party that has sold its tax push as primarily about helping the middle class. But much of the push for the tax bill comes from corporate America. President Donald Trump and GOP leaders have drawn a firm line at setting the corporate income tax rate at 20 percent.
Democrats are sure to highlight the vote in campaign commercials for the 2018 congressional elections. -- Sahil Kapur
Democrats Blast Break for School Tied to DeVos (8:56 p.m.)
Democratic senators attacked a planned amendment to the Senate tax bill that they said would benefit a conservative Michigan college with ties to the family of U.S. Education Secretary Betsy DeVos.
GOP Senator Pat Toomey of Pennsylvania said he believed Hillsdale College would qualify for the break offered by his amendment, which would exempt colleges that refuse federal student loan funding from a proposed tax on endowments. Hillsdale “does not accept or permit its students to bring federal financial aid to campus,” according to its website.
It was unclear Friday night whether any other universities would qualify for the exemption -- though Toomey said: “Anybody that’s in this category would have this same treatment.”
He called Hillsdale, a private school of about 1,500 students, “a wonderful institution.” One Hillsdale graduate is Erik Prince, the brother of DeVos and the founder of the military contractor formerly known as Blackwater.
“It feels like this is a very limited provision written for a very special person,” Democratic Senator Claire McCaskill of Missouri told Toomey. -- Sahil Kapur and Janet Lorin
Democrats Decry ‘Illegible’ Handwritten Tweak (7:28 p.m.)
Democratic senators heaped criticism on a handwritten amendment that was distributed to them Friday -- hours before a potential vote -- as Republican Senate leaders rushed to secure approval of their tax overhaul legislation.
Senator Michael Bennet, a Colorado Democrat, called it “illegible.” The handwritten change appears in the margin of page 257 of an amended version of the bill. GOP senators have yet to release the text. It was obtained by Bloomberg News.
It’s not unusual for amendments in Senate debates to include handwritten changes, but Democrats said this particular instance was excessive.
“This is what happens when you push through a bill late at night,” said Senator Dick Durbin, an Illinois Democrat. -- Sahil Kapur
Revised Bill Includes 23% Pass-Through Break (6:10 p.m.)
An amended version of the Senate tax plan includes a 23 percent deduction for pass-through businesses, according to a draft obtained by Bloomberg News.
Click here to see the draft of the legislative text.
The legislative text -- expected to be released Friday evening -- will clear the way for the bill’s passage late Friday or early Saturday.
A potentially unlimited series of decisions on possible amendments -- known as “vote-a-rama” -- is expected to begin shortly after the release of the revised bill. It’s unclear how long that process might take; Democrats could spend hours offering numerous amendments meant to highlight any flaws they believe the bill contains.
Senate Majority Leader Mitch McConnell said Friday afternoon that GOP leaders have the votes needed for approval. Republican senators whose support had been in question -- including Susan Collins of Maine, Jeff Flake of Arizona and James Lankford of Oklahoma -- said Friday they supported the plan after some of their requested changes had been made.
The Republicans have a slim majority in the Senate and can only afford to lose two of their 52 members to pass a tax bill without Democratic support. -- Sahil Kapur
Bob Corker Says He Won’t Support Current Bill (4:52 p.m.)
Republican Senator Bob Corker of Tennessee said he won’t support the current version of the Senate tax bill over deficit concerns.
“I wanted to get to yes,” Corker said in a statement. “But at the end of the day, I am not able to cast aside my fiscal concerns and vote for legislation that I believe, based on the information I currently have, could deepen the debt burden on future generations.”
Still, Corker said he would take a “close look” at the tax bill produced by a House-Senate conference committee before making a final decision. -- Sahil Kapur
Susan Collins Says She’ll Support Senate Bill (4:10 p.m.)
Republican Senator Susan Collins of Maine -- one of the remaining GOP senators whose support was in question -- said she’ll support the tax plan.
“I will cast my vote in support of the Senate tax reform bill,” Collins said in a statement Friday. “As revised, this bill will provide much-needed tax relief and simplification for lower- and middle-income families, while spurring the creation of good jobs and greater economic growth.”
Collins said she was successful in pushing for leaders to preserve the state and local property tax break up to $10,000, lower the threshold for claiming the deduction for high unreimbursed medical expenses and permit catch-up contributions to retirement accounts for certain public employees.
She said she was pleased that Senate Majority Leader Mitch McConnell had committed to support the passage of two pieces of legislation before the end of the year to mitigate the cost of health insurance premiums. The Senate bill currently calls for repealing the Obamacare individual mandate.
Collins also cited a commitment made Friday by Speaker Paul Ryan and McConnell to work to waive automatic Medicare and other entitlement cuts that would be triggered in January due to the deficit increases caused by the bill. -- Erik Wasson
Bill’s New ‘Major Provisions’ Exceed $300 Billion (2:44 p.m.)
The “major provisions” that Senate Republicans plan for their tax legislation include benefits for individuals who pay property taxes and have large medical expenses -- along with owners of limited liability companies and other so-called pass-through businesses, according to a summary of the changes that was confirmed by two people familiar with the plans.
The plans are evolving and still subject to change. But in all, the major new tax benefits would cost more than $300 billion over 10 years, according to the summary. They’d be paid for by retaining the alternative minimum tax for corporations and individuals and by increasing the tax rates that multinationals would pay on an estimated $3.1 trillion in accumulated offshore earnings, the summary says. It also provides for unspecified “reconciliation instruction savings” of roughly $50 billion.
The changes appear to include one offered by GOP Senator Susan Collins of Maine, who has proposed enhancing the deduction available to people for high medical expenses. Her proposal would reduce the deduction threshold to 7.5 percent of income from 10 percent. The bill that the House approved last month would eliminate that deduction entirely. -- Kaustuv Basu
Senate Would Create New AMT, GOP Senator Says (1:38 p.m.)
A revised version of the Senate tax bill includes a new individual alternative minimum tax to help pay for proposed changes, according to Republican Senator Mike Rounds of South Dakota.
The so-called AMT would have graduated increases, Rounds said. The original version of the tax plan called for repealing the AMT, which was originally designed to make sure wealthy households couldn’t use deductions or credits to pay little or no federal income tax. Over time, inflation has meant that larger numbers of people have paid the tax.
The individual AMT was responsible for 80 percent of President Donald Trump’s 2005 federal income tax bill of $38.4 million, on income of $152.7 million, according to pages of the return that were leaked in March.
Eliminating the individual AMT is estimated to cost $769 billion over a decade, according to the Joint Committee on Taxation.
The new Senate bill will also include a modified corporate AMT, according to Rounds. The initial bill would have eliminated it.
The revenue saved from the AMT changes would be used to help pay for modifications pushed by GOP senators whose support has been in question. Senator Susan Collins of Maine has called for preserving individuals’ state and local property tax deduction up to $10,000, as the House bill does. That change is estimated to cost about $100 billion over a decade, according to a House aide who asked not to be named.
Senators have also agreed to raise the rates that multinationals would pay on their accumulated offshore earnings to help finance a more generous tax break for partnerships, limited liability companies and other so-called pass-through businesses, Republican Senator Ron Johnson said. -- Laura Davison
McConnell Says ‘We Have the Votes’ on Bill (12:40 p.m.)
Senate Majority Leader Mitch McConnell says Republicans have the votes to pass their tax bill.
A vote may come later Friday or early Saturday morning, according to White House Legislative Affairs Director Marc Short.
“There’s no doubt that repealing Obamacare -- that effort not succeeding -- put additional pressure on all of us to get tax relief done,” Short said.
One of the remaining holdouts -- Jeff Flake of Arizona -- said he supported the bill in a statement Friday afternoon after securing assurance that what he called a budget gimmick would be eliminated and that leaders would commit to work with him on finding a solution to protect immigrants who were brought illegally to the U.S. as children.
Democrats and many Republicans want to protect undocumented immigrants brought to the U.S. as children from being deported. Trump announced in September that he would end the Obama-era Deferred Action for Childhood Arrivals program in six months and that it was up to Congress to provide any further action. -- Erik Wasson, Sahil Kapur and Laura Litvan
Senate Bill Won’t Include Extra Tax Increases (11:56 a.m.)
The Senate tax bill won’t feature any mechanisms to ward against future deficit increases, according to GOP senators Ted Cruz of Texas, Lindsey Graham of South Carolina and James Lankford of Oklahoma.
The move is a blow to Senator Bob Corker, who had pushed for a trigger that would have increased taxes if economic growth didn’t meet revenue targets. After the Senate parliamentarian ruled a potential trigger violated the chamber’s rules, negotiations continued over including additional tax increases totaling about $350 billion.
Lankford, who had been pushing for the trigger as well, said he would vote for the bill even though his deficit concerns remain.
Senators have also agreed to raise the rates that multinationals would pay on their accumulated offshore earnings to help finance a more generous tax break for partnerships, limited liability companies and other so-called pass-through businesses, Republican Senator Ron Johnson said.
The revised Senate bill would tax companies’ offshore income at 14 percent for cash and 7 percent for earnings invested in less-liquid assets -- mirroring a provision in the House legislation, Johnson, of Wisconsin, told reporters. The initial Senate bill called for rates of 10 percent and 5 percent.
U.S. companies currently can defer taxes on their foreign earnings until they return them to the U.S. Companies have an estimated $3.1 trillion stockpiled offshore. -- Erik Wasson, Steven T. Dennis and Kaustuv Basu
Senate Said to Preserve Property Tax Break (11:32 a.m.)
The Senate tax bill will include a measure preserving the state and local property tax deduction for individuals up to $10,000 -- mirroring the House bill in that regard, according to a person working on making changes to the bill. The person asked not to be named because the discussions are private.
The current version of the Senate tax bill calls for a full repeal of state and local tax deductions, which include property, income and sales taxes.
Republican Senator Susan Collins of Maine has been pushing for preserving the break for property taxes up to $10,000. -- Sahil Kapur
Collins Says She’s Still a Holdout on Bill (10:45 a.m.)
Republican Senator Susan Collins of Maine said she hasn’t announced her support of the tax bill yet, adding it’s “amazing” that No. 2 Senate Republican John Cornyn would say the plan has 50 votes to pass.
Still, Collins said there’s been “very good progress.” Collins wants to expand the child tax credit, maintain a deduction for state and local property taxes and secure separate legislation aimed at stabilizing individual insurance markets.
Cornyn of Texas earlier implied that Collins backed the bill, and said leaders were still hoping to get Bob Corker of Tennessee and Jeff Flake of Arizona on board.
“We’re confident of the 50 and we’d like to build on that,” Cornyn said.
Another potential holdout -- James Lankford of Oklahoma -- supports the bill, according to Darrell Jordan, a spokesman for the lawmaker.
Senate Finance Chairman Orrin Hatch also said that he thought Collins would be on board, along with Lankford.
“I think they’ll be with us,” Hatch said. “I have no doubt about it.”
Senate leaders need 50 of their 52-member GOP caucus to approve a tax bill. Vice President Mike Pence could break a 50-50 tie.
Corker, Flake and Lankford have expressed concerns about the bill’s anticipated expansion of federal deficits. -- Erik Wasson and Laura Litvan
Higher Pass-Through Break Wins Holdout’s Vote (8:50 a.m.)
The Senate tax bill will be revised to include a larger tax break for partnerships, limited liability companies and other so-called pass-through businesses -- winning the support of holdout Senator Ron Johnson, an aide to the Wisconsin Republican said.
Johnson and GOP Senator Steve Daines of Montana had been seeking a more generous tax break for the closely held businesses.
The initial bill would have allowed owners of such businesses to deduct 17.4 percent from their business income for tax purposes -- subject to certain income thresholds. The newest version of the bill will increase that deduction to 23 percent, Daines said.
It wasn’t clear Friday morning how Senate tax writers would offset the cost of a more generous deduction. Johnson has suggested eliminating a corporate tax deduction for state and local taxes -- similar to an individual repeal that’s already in the Senate bill.
Senate tax writers are expected to reveal changes to their bill Friday, with the chamber scheduled to resume votes related to the measure at about 11 a.m. The process hit a snag on Thursday evening over some senators’ deficit concerns. The nonpartisan Joint Committee on Taxation found Thursday afternoon that the bill as written would increase federal deficits by roughly $1 trillion over 10 years -- even after accounting for any economic growth it would produce.
The delay shook some tax-sensitive bank stocks. Bank of America Corp. was down 1.2 percent pre-market; JPMorgan Chase & Co. was down 1 percent. Wells Fargo & Co. was down 0.9 percent; Goldman Sachs Group Inc. and Morgan Stanley were both down 0.8 percent. --Erik Wasson
Senate GOP Working to Address Deficit Concerns (8:14 a.m.)
Senate Republicans made a lot of progress overnight in crafting a new approach to address deficit concerns in their sweeping tax legislation, according to a Senate GOP aide.
More work remains in the next few hours, said the aide, who asked not to be identified because the discussions are sensitive. The Senate is scheduled to hold its first votes of the day at 11 a.m. on a pair of Democratic motions as GOP leaders try to salvage the legislation, which they see as vital to their political fortunes.
Senator Steve Daines, a Montana Republican, said Friday morning he backs the tax plan. He said in an interview that he thinks the bill will pass without a deficit-cutting mechanism sought by GOP Senator Bob Corker of Tennessee.
"That’s going nowhere," he said. "What Bob was suggesting is just causing more problems." Daines said he would oppose changing the bill to retain the alternative-minimum tax or to add another tax increase.
After failing to score any major legislative victory since President Donald Trump took office -- including a repeal of Obamacare that they’d promised for years -- Republicans have put all their chips into the most sweeping rewrite of the U.S. tax code in three decades.
If passed, it’s likely to be a centerpiece of their 2018 congressional campaigns, which will decide control of the House and Senate. Depending on the contours of the final tax package, the legislation is likely to feature prominently in Democratic campaigns as well. -- Erik Wasson
Senate Republicans Work to Salvage Tax Bill (4:00 a.m.)
Senate Republicans are struggling to salvage sweeping tax legislation they see as vital to their political fortunes amid an intra-party squabble over deficits that may undercut Trump’s promise of lasting and broad rate cuts.
Majority Leader Mitch McConnell called off a planned series of votes on the tax measure until Friday morning as he and other leaders negotiated their way around objections from three GOP senators that the measure, cobbled together in a matter of weeks, would explode federal budget deficits and add to the national debt.
Some of the solutions that were debated late Thursday night --including letting some taxes rise for individuals and corporations within six or seven years -- threaten to dissolve the precarious Republican majority for the legislation.
They also risk creating a stalemate with the House, where hardline conservatives could throw up roadblocks to reconciling differences if the Senate version waters down tax cuts for businesses and individuals. The House is moving toward naming their members to a conference committee by Monday night.
“We’re trying to get to a point where nobody is going to get exactly what they want but enough to get the bill passed,” Senator Thom Tillis of North Carolina said.
After failing to score any major legislative victory since Trump took office -- including a repeal of Obamacare that they’d promised for years -- Republicans have put all their chips into the most sweeping rewrite of the U.S. tax code in three decades. If passed, it’s likely to be a centerpiece of their 2018 congressional campaigns, which will decide control of the House and Senate. Depending on the contours of the final tax package, the legislation is likely to feature prominently in Democratic campaigns as well.
The plans from both chambers already were well short of the promises made by Trump that middle-income Americans would be the biggest beneficiaries and the pitch by Congressional Republicans that the tax cuts would generate enough economic growth to pay for themselves.
An analysis released Thursday by the Joint Committee on Taxation, Congress’s official scorekeeper, concluded that the Senate bill would boost gross domestic product by about 0.8 percent on average over the next 10 years. But that still wouldn’t cover the loss of government revenue, leaving a shortfall of roughly $1 trillion over the decade, the JCT said.
The nonpartisan Congressional Research Service concluded separately that under the Senate plan, Americans making between $500,000 and $1 million a year would see the biggest percentage increases in their after-tax income, but taxpayers making less than $30,000 would see their after-tax income decline as soon as 2021.
Most Republicans brushed aside those conclusion. “I think it’s pretty clearly wrong, but it’s their opinion,” Senator John Cornyn, the No. 2 Republican in the chamber, said of the JCT analysis.
But the momentum to pass the legislation in the Senate came to a halt Thursday night over deficit concerns and arcane parliamentary rules.
Two of the three Republican holdouts over a procedural vote -- Corker and Jeff Flake of Arizona -- had tied their support to a complex mechanism that would trigger tax increases if government revenue targets weren’t met. James Lankford of Oklahoma has also said he has deficit concerns. The third holdout -- Ron Johnson of Wisconsin -- has argued that pass-through businesses aren’t getting deep enough tax cuts.
But the Senate parliamentarian ruled a potential trigger violated the chamber’s rules, leading to a dramatic hour-long delay in action on the Senate floor.
The legislation is “still changing,” said Corker, who is retiring when his term is up after next year’s election and so is under less pressure to soften his stance to get something passed. “I’m trying to do the best I can to make it a better bill.”
Though Corker was one of three senators raising the deficit concerns, Senator Ted Cruz of Texas was among the Republicans singling him out, ignoring other potential opposition.
Cruz said he “absolutely” will fight Corker’s effort to add taxes back to the Senate’s tax bill.
"Fifty-one senators want to cut taxes," Cruz said. "One is trying to raise taxes. That’s not right."
Lankford said the Senate parliamentarian hadn’t issued a formal ruling yet on a trigger, and Cornyn later tweeted members were still exploring options for triggers.
Cornyn said Corker “latched on” to the analysis by the JCT and is insistent that there should be no added deficit. He said there’s been a discussion of a “stair-step” approach in which taxes would rise beginning in the sixth year of enactment if revenue targets aren’t met.
Cornyn said his preference would be not to add taxes, "but what I want most is 50 votes." -- Erik Wasson, Steven T. Dennis, Sahil Kapur and Laura Litvan
What to Watch on Friday:
- Senate votes are scheduled to resume at 11 a.m. on Democratic motions.
- Senate leaders may release details of how they will address concerns about future deficits as well as other objections from Republican lawmakers.
- Numerous amendments will be proposed and voted on, leading up to what Republican leaders are expecting to be final passage by Friday night.
Here’s What Happened on Thursday:
- Senate Majority Leader Mitch McConnell suspended votes after a key compromise on dealing with deficits collapsed.
- An analysis 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.
- Republican John McCain of Arizona said he would support the tax bill, a key vote for party leaders who can afford to lose only two of the members to pass the legislation. McCain’s statement added to the already buoyant sentiment in the U.S. stock market.
- 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.
— With assistance by Erik Wasson, Kaustuv Basu, Allyson Versprille, Steven T. Dennis, Laura Litvan, Sahil Kapur, and Lynnley Browning