House Tax Bill Set for Debut, but Senate Holds the Key

Though Republicans in the two chambers have some different priorities, the House may well have to agree to whatever the Senate can pass.

Sen. Susan Collins at the Capitol on Oct. 17.
AP Photo/J. Scott Applewhite
Oct. 30, 2017, 8 p.m.

House tax writers are set to release their broad tax-code rewrite Wednesday, but amid the jockeying in the House, a tough hurdle remains across the Capitol building: the slim GOP margin in the Senate.

Each chamber faces unique challenges in passing a tax bill, which represents one of the final chances for Republicans to pass significant legislation before the end of the year. But it’s in the Senate that the vote math could be the tightest, a dynamic that’s led some to say the upper chamber will have a sizable influence on the details of the final bill.

“I think there is a very strong possibility that the bill that becomes law is defined by what can pass in the Senate,” said Jon Traub, a managing principal at Deloitte and a former staff member on the tax-writing House Ways and Means Committee.

House members are sensing the dynamic, too.

“May I be so bold again as to say the tax-reform bill that gets signed into law is whatever passes the Senate?” Republican moderate Charlie Dent told reporters last week.

Washington will finally get a look at how House tax writers plan to pay for their sharp cuts to corporate and individual taxes when Ways and Means Committee Chairman Kevin Brady releases his draft tax bill Wednesday. Then, Brady’s committee is likely to hold a markup next week, with the Senate unveiling a draft of its tax bill next week and a markup soon after.

Leadership hopes to hold votes on those versions by Thanksgiving, with a conference committee producing a final version of the bill by mid-December.

With 52 GOP members, Republicans can afford to lose only two votes in the Senate, and a handful of senators could play spoiler. Sens. Susan Collins and Lisa Murkowski, moderate Republicans, could have a similar role to the one they had in the effort to repeal Obamacare, and vote down the bill.

Collins told Bloomberg on Monday that she opposed eliminating the estate tax, a key pillar of the current GOP tax plan. Collins also said she opposed cutting the top individual rate—currently set at 39.6 percent—for individuals making more than $1 million per year.

Sen. Bob Corker, meanwhile, could in turn give a thumbs down to the tax bill over deficit concerns, while Sen. Rand Paul could oppose the plan if it doesn’t have enough middle-class tax cuts.

Traub added that he didn’t think it was likely that either chamber would be able to jam its version through by passing the measure and ducking out for recess, forcing the other to pass its version with no conference committee.

“I do not think this is the kind of bill on which you can play ding-dong ditch with the other chamber,” Traub said. “I do think there are institutional limits that will dictate how this can proceed and what can become law, if anything, but I doubt it will be defined by an effort to jam the other chamber as the clock expires.”

Concern over what the Senate ultimately produces, and can pass, has already been felt in one of the big controversies to hit the tax plan: the effort to repeal the deduction for state and local taxes.

House tax writers have wanted to eliminate the deduction entirely—which would raise more than $1 trillion over a decade—but Republican members from high-tax states such as New York and New Jersey are putting up resistance, saying it would hit their middle-class constituents.

Members have been meeting with tax writers for weeks to hash out a compromise, and over the weekend, Brady floated a proposal that would preserve the deduction for state property tax. That likely means the deduction for state income tax would remain on the chopping block.

It’s unclear if Brady’s proposal will bring over enough House members to pass the tax plan there—which is a real threat. Some New York Republicans, however, have appeared open to the proposal, Politico reported Saturday.

If Brady strikes a deal with high-tax-state Republicans, the Senate must also go along with the deal in its bill. But the state-and-local-tax issue is a bigger one for the House than the Senate, Dent said.

“Republicans have no members from New Jersey and New York and California or Illinois,” Dent said of the Senate. “So, that’ll be a bit of a challenge, but it could be we pass a bill here out of the House that will be toned down in the Senate—that’s always possible.”

But some House Republicans from high-tax-states have already fired a warning shot, fighting to preserve the deduction.

“We stood firm to say ‘no’ as a group today to let them know we are not kidding, and also we’re going to let the Senate know if they try and take it out, they’re going to have a problem,” New York Republican John Katko said last week after leaving a meeting with House leaders and tax writers on the issue.

Speaking to reporters last week, Brady expressed confidence that Senate Finance Committee Chairman Orrin Hatch would take up the provision in his bill.

“My discussions with Chairman Hatch are pretty regular, and he’s fully aware that this is an important issue for our House members and that we are taking the lead to find a solution, and I’m confident that will be honored,” Brady said.

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