Republican lawmakers are optimistic about an effort to reconcile the House and Senate tax-overhaul plans, but the sweeping bills have major hurdles to overcome before Congress can send a bill to the president’s desk.
The House easily passed its bill Thursday, with Republicans racking up 227 votes in favor of the measure. Thirteen Republicans voted against the bill, largely over its proposal to limit the state and local tax deduction.
The move puts the GOP tax effort one step closer to final passage and provides much-needed legislative momentum for Republicans, who are still looking to pass at least one major bill this year.
But the biggest challenges lie ahead. The version in the Senate, where Republicans have a slim, two-vote margin, is meeting resistance, and at least one GOP senator said he won’t vote for the measure as is. The tax-writing Senate Finance Committee continued its consideration of the bill Thursday and will likely wrap up this week. A vote in the full Senate could come as lawmakers return from the Thanksgiving recess.
Stark differences remain between the two versions, which would need to be ironed out in a conference committee if the Senate passes its bill. So far, GOP lawmakers remain outwardly upbeat about the chances for finding a resolution to key differences.
“I think a conference committee—a little bit counterintuitive—I think it’s going to be easier than most people think,” said Rep. Peter Roskam, chairman of the House Ways and Means Tax Policy Subcommittee. “And the reason is because the parameters—you look at these two bills, the House bill and the Senate Finance draft—and there are differences, but the differences are not irreconcilable.”
A conference committee is likely to be contentious, however, and there’s no guarantee that lawmakers can find a middle ground on several issues to satisfy both chambers.
As it stands, the Senate version would fully repeal the deduction for state and local taxes, while the House version contains a hard-fought deal between tax writers and Republican members in high-tax states like New York and New Jersey. That bill would repeal the deduction for state income tax, but allow a $10,000 deduction for property tax. Many affected House members ended up voting for the tax bill Thursday, but that could change if a conference committee adopts the Senate language.
“That’s not going to happen,” GOP Rep. Tom Reed of New York, who voted for the tax bill, said of the Senate eliminating the property-tax deduction.
Other potentially thorny differences: If the Senate plan passes as it is now, it would keep the mortgage-interest-deduction cap at $1 million, while the House bill would halve the tax break. The Senate and House bills also differ on the tax treatment for pass-through entities such as S-corporations and partnerships, and on how to structure a new international tax system.
Several GOP senators have major issues with their chamber’s bill. Sen. Ron Johnson of Wisconsin said Wednesday that he couldn’t support the Senate bill because of its treatment of pass-through entities, businesses which pass their profits onto the owner and are taxed at the individual rate.
“Right now, we’re having to deal with a thorny situation—the complex situation of how can we maintain the competitive position of balance between C-corps and pass-throughs,” Johnson said.
Democrats remain critical of the GOP proposals, particularly the plans to sunset key individual tax breaks such as a family tax credit in the House version and an expansion of the Child Tax Credit, an increase in the standard deduction, and others in the Senate version.
“I’m opposed strongly to the bill that is on offer now because it writes in black-letter law a double standard with multinational corporations getting permanent tax relief and the working-class people—once again, they come second,” Senate Finance Committee ranking member Ron Wyden told reporters Wednesday.
Those expiring tax breaks have led to a tough scoring for Senate Republicans from the nonpartisan Joint Committee on Taxation, which released a report Thursday saying the Senate version would raise taxes on Americans earning between $10,000 and $75,000 over 10 years.
That will make it harder to sell the bill as a middle-class cut, and it may rankle deficit hawks as well. Much of the justification for making the individual breaks temporary has been that no future Congress would allow them to expire, but that effectively creates a massive new spending bill years down the road.
“I’m more worried about the fiscal problem. We always say we are going to sunset something, and we rarely do,” said Sen. Jeff Flake, who voiced concern over the deficit issue.
Sen. Bob Corker has said he wouldn’t vote for a bill that added to the deficit. Corker has been meeting with the administration regularly on the issue.
Those expiring provisions in the Senate bill were necessary to help the measure sneak in under the $1.5 trillion cap in deficit spending over a decade required in the upper chamber, as well as a rule that says the bill can add to the deficit after 10 years.
House Ways and Means Chairman Kevin Brady didn’t comment directly on the expiring breaks—such as the Senate’s plan to sunset an Alternative Minimum Tax repeal—saying instead that a conference committee would “take the best of both worlds” of either bill.
“That’ll be a final decision in conference, so I think the important thing is that they they’ve got a plan, they’re executing it, and we’re really excited they are moving it forward,” Brady said.
All that could also make it harder to sway moderate Republicans like Sens. Susan Collins of Maine and Lisa Murkowski of Alaska, who both say they’re waiting for the Finance Committee to complete consideration of the bill. Collins also expressed concern about the Senate bill’s proposal to repeal the Affordable Care Act’s individual mandate.
“I still have a lot of questions about the bill, but obviously this bill is a moving target, so I’m going to wait and see what comes out of the Finance Committee,” Collins said Wednesday.