Congress Sends Trump Tax-Cut Bill in First GOP Legislative Win

Updated on
  • Measure slashes corporate rate with short-term individual cuts
  • Democrats invoked budget rule forcing House to vote again
Bloomberg’s Kevin Cirilli reports on Congress passing the tax reform bill.

House Republicans passed the most extensive rewrite of the U.S. tax code in more than 30 years -- hours after the Senate passed the legislation -- handing President Donald Trump his first major legislative victory.

The chamber’s 224-201 party line vote on Wednesday -- a redo thanks to a procedural hiccup -- sent a bill to the president that provides a deep, permanent tax cut for corporations and shorter-term relief for individuals. Not a single Democrat in either chamber voted for the measure.

The legislation, which has scored poorly in public opinion polls, promises to become one of the biggest issues in the 2018 elections that will determine whether the GOP retains its majorities in Congress.

“I think minds are going to change and I think people are going to change their view on this,” House Speaker Paul Ryan, a Republican from Wisconsin, told ABC’s “Good Morning America” before the vote Wednesday. “The average taxpayer in every income group is getting a tax cut.”

The vote was a triumph for Ryan, a self-described policy wonk who put aside his vision for a more comprehensive, cutting-edge -- and controversial -- approach to overhauling corporate taxes earlier this year. In the end, Ryan oversaw compromises that trimmed some personal deductions and settled for temporary individual tax relief to help cover the cost of the deep corporate tax cut.

“I promised the American people a big, beautiful tax cut for Christmas. With final passage of this legislation, that is exactly what they are getting,” Trump said in a statement. “By cutting taxes and reforming the broken system, we are now pouring rocket fuel into the engine of our economy.”

The House took its second vote on the bill in two days after Senate Democrats forced their GOP counterparts to make three relatively minor changes to the bill -- including dropping a provision that had named it the “Tax Cuts and Jobs Act.” Under congressional rules, the House and Senate must approve the same bills.

Other changes were related to provisions allowing parents to use 529 educational savings accounts to cover expenses of home-schooling their children and subjecting certain private universities’ endowments to a new excise tax.

“The only thing better than voting on tax cuts once is voting on tax cuts twice,” House Ways and Means Chairman Kevin Brady, a Texas Republican, said Tuesday.

The Senate passed the legislation on a party line vote just before 12:45 a.m. on Wednesday. Trump marked the occasion on Twitter, calling the legislation “the biggest in history Tax Cut and Reform Bill” -- though experts have said that’s not the case.

The White House is planning to hold a “bill passage event” with House and Senate members at 3 p.m. But the gathering won’t be a signing event, which will happen at a “later date,” White House Press Secretary Sarah Huckabee Sanders said in an emailed statement.

SALT Controversy

“For the first time in more than three decades, we cleared a comprehensive overhaul of the nation’s tax code and delivered on our promise of creating and advancing pro-growth policies,” said Senator Orrin Hatch, the Utah Republican who chairs the tax-writing Finance Committee.

The bill slashes the corporate tax rate to 21 percent from 35 percent, enhancing the U.S. position against other industrialized economies, which have an average corporate rate of 22.5 percent. It offers an array of temporary tax breaks for other types of businesses and for individuals -- including rate cuts that will tend to favor the highest earners. Most middle-class workers will also get short-term relief, but independent analyses show the amounts aren’t large.

The average tax cut for the bottom 80 percent of earners would be about $675 in 2018, according to an analysis by the Urban Brookings Tax Policy Center. The top 1 percent of earners would get an average cut of about $50,000 that year, and the top 0.1 percent would get an average of $190,000, according to the group’s analysis.

Some middle-class families could see hikes because of changes to the so-called SALT deduction, which provides a tax break on state and local property taxes as well as income taxes or sales taxes. The provision to cap those deductions at $10,000 proved to be one of the most contentious for House Republicans from high-tax states. GOP lawmakers in New York, New Jersey and California have objected to limiting the deduction, saying it might hurt them politically.

In Tuesday and Wednesday’s House vote, only 12 Republicans -- all but one of them from those three states -- voted against the measure.

Spending Side

Senate Majority Leader Mitch McConnell predicted that the changes would gain favor with voters who have so far been cool to the legislation in polls.

“If we can’t sell this to the American people, we ought to go into another line of work,” he said during a news conference after the Senate vote.

The changes would reduce federal revenue by almost $1.5 trillion over the coming decade -- before accounting for any economic growth that might result, according to Congress’s Joint Committee on Taxation, which analyzes tax legislation. Earlier versions were forecast to increase deficits by roughly $1 trillion even after any growth effects.

Asked whether the tax plan will add to the deficit, Ryan said, “We need to keep focused on the spending side of the ledger as well.” He said in the coming year, Congress will be focused on giving states more flexibility with Medicaid and on “getting people from welfare to work.”

Obamacare’s Heart

In one of the tax measure’s most controversial provisions, GOP senators attached language that repeals a major piece of the health-care legislation: the individual mandate that requires people to have insurance coverage.

“It’s not a total replacement, but it takes the heart out of Obamacare,” McConnell said in an interview Tuesday before the Senate vote.

GOP leaders say the Obamacare mandate’s penalty -- $695 for individuals -- falls disproportionately on lower- and middle-income people. Repealing it is estimated to generate roughly $300 billion over 10 years, helping to keep the tax bill from creating even larger potential deficits. But at the same time, about 13 million people are expected to drop their insurance coverage over that decade, according to the Congressional Budget Office’s estimate.

Some health economists say the change would lead to higher health-coverage premiums, perhaps canceling out the effect of the individual tax cuts for many. Some GOP lawmakers, including Senator Susan Collins of Maine, are seeking legislation to help stabilize the situation, but the fate of those efforts remains unclear.

McConnell said Tuesday he would offer such provisions in a spending bill “later in the week.”

‘Crumbs and Tax Hikes’

Collins, a moderate, also won concessions that expanded a deduction for medical expenses for two years and preserved a partial individual deduction for state and local taxes.

Overall, the bill has failed to win broad popularity in public opinion polls. Despite Trump’s repeated attempts to sell it as a boon for the middle class, half the public thinks they’ll pay higher taxes under the bill, according to a Monmouth University poll that was released Monday.

Democrats say they’re eager to make the tax bill a major issue in next year’s congressional elections.

“The bill provides crumbs and tax hikes for middle-class families in this country and a Christmas gift to major corporations and billionaire investors,” Senate Minority Leader Chuck Schumer, a New York Democrat, said Tuesday. “Republicans will rue the day they passed this bill and the American people will never let them forget it.”

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