Republicans on the Senate Finance Committee voted Thursday night to send their tax bill to the Senate floor, planning to amend it there to shore up support among their members to keep tax reform on track for passage this year.
With the committee approval, President Trump and congressional Republicans are still speeding toward enacting major tax legislation, as Thursday night's Senate vote followed shortly after the House passed its version of the Tax Cuts and Jobs Act.
"I'm personally proud of what we’ve accomplished here on behalf of the middle class," said Orrin Hatch of Utah, the committee's chairman, right before passage. "I won't count any proverbial chickens before they’re hatched — no pun intended — but I think we've produced a bill that can and will pass both chambers."
A Hatch amendment added late Thursday night made minor changes to the bill, most notably adopting the House bill's treatment of "carried interest" income, limiting it to long-term investors.
The amendment left unaddressed several major issues that could affect the bill's changes before passage in the full Senate.
The biggest question looming over the bill is whether it will pass while including a repeal of Obamacare’s individual mandate, a provision that Republicans added to the bill Tuesday night as one of several major late changes.
Trump strongly favors repealing the mandate with the bill, and repeal also frees up $318 billion over a decade that is used to help pay for the bill’s other tax cuts.
Even so, keeping the individual mandate repeal in the legislation could endanger the votes of Republican centrists such as Maine’s Susan Collins, who said she was wary of changing a system as complex as healthcare in a tax bill.
More generally, Republicans risk replaying the Obamacare replacement effort, which was a loser for them.
Oregon’s Ron Wyden, the ranking Democrat on the Finance Committee, told reporters off the Senate floor that opposition to the tax bill grew after the GOP included mandate repeal. “Now that they have made this a healthcare issue, I can tell you, we are hearing from grassroots groups all over the country,” he said.
“We’ve been socializing that a lot,” said John Thune, the No. 3 Republican in the Senate, acknowledging that repealing the mandate is an uncertain political proposition. “But frankly, the individual mandate is a tax issue.”
Republicans will also need a fix to gain the support of Ron Johnson, R-Wis., who said Wednesday that he opposed the bill because it did not include adequate tax breaks for noncorporate businesses like partnerships and sole proprietorship.
Already, that tax cut is among the biggest revenue losers in the bill, lowering taxes by $362 billion over 10 years. Sweetening the deal for small businesses would be an additional revenue loss that Republicans would have to scramble to make up elsewhere to stay below the $1.5 trillion limit.
Hatch said that Johnson’s complaints would also likely be addressed in a floor vote. At the start of Thursday’s markup, he also defended the policy in the bill. “Our pass-through solution is simple and effective, which is why the bill is supported by the National Federation of Independent Business,” he said, referring to a major small-business group.
The plan for Republicans is to bring the bill to the Senate floor the week after Thanksgiving, allowing the holiday week to make any needed changes and to coordinate with the House on changes to be made in a conference committee.
"When you’re reaching for the cranberry sauce, Republicans are going to be reaching for your pocketbooks to give handouts to multinational corporations,” Wyden said during Thursday’s markup.
If and when Republicans do reach conference committee, they will have to resolve several major differences between their two bills, the most salient being that the House bill allows for $10,000 in deductions for state and local property taxes. The Senate measure repeals entirely deductions for state and local taxes.
House Speaker Paul Ryan, R-Wis., and other GOP leaders in the lower chamber have said that the property tax allowance needs to be included in the bill that is sent to Trump’s desk, given assurances they’ve made to their party's members. The break was necessary to secure the votes of some members from high-tax states like New York, New Jersey, and California.
Of the 13 Republicans who voted against the House bill Thursday, all but one were from those three states. More votes would have been lost without the $10,000 compromise.
In Thursday night’s markup, Democrats honed in on the Senate bill’s elimination of the SALT deduction, as it is called. “You’ve made it much more extreme than even the House on this issue, making it very much more detrimental to the taxpayers of this country,” said Maryland’s Ben Cardin.
Democratic amendments to undo the repeal of the deduction, however, fell short in party-line votes in Thursday’s markup, as did all their other amendments, which were geared toward messaging rather than at changing the bill so they could vote for it.
The debate turned hostile late Thursday night, the fourth day of mark-up, after Sherrod Brown, D-Ohio, accused Republicans of merely wanting to cut the taxes of the rich.
"This bullcrap you guys throw out here really gets old," Hatch replied angrily, after banging down the gavel to restore order.