President Trump came to the Capitol Tuesday to appeal to a small but critical group of Republican senators, who’ve put in peril Congress’ most fundamental tax overhaul in over 30 years because they’re concerned by the way it treats corporations better than other companies, exacerbates the health care coverage problems of the poor, and saddles the country with more debt.
By all accounts, he and Republican leaders in Congress succeeded.
They navigated those three problems without giving up much. Key senators simply dropped their objections, consented to conceptual agreements, or agreed to side deals that the House could negate. The moves reflected Republicans’ deep desire to pass a Senate bill in the next couple of weeks and a bill out of Congress by the end of the year. Otherwise, Republicans could head into the 2018 midterm elections without much to show for complete control of Washington.
After the lunch, Sen. Ron Johnson of Wisconsin, who has threatened to oppose the bill, voted it out of the Budget Committee to keep it coursing forward.
Johnson is concerned that the bill benefits corporations more so than “pass-through” entities like limited-liability companies and partnerships, whose owners’ profits are taxed on the individual side of the code. The bill cuts the corporate rate from 35 to 20 percent, while pass-throughs would get a rate in the low 30s, after paying a top individual rate of 38.5 percent and taking a 17.4 percent deduction from taxes.
Johnson is still pushing to lower the pass-through rate by increasing that 17.4 percent deduction to at least 20 percent. To pay for that, he proposes eliminating the corporate deduction for state and local taxes—an idea that some members of the Republican leadership have said isn’t practical. Senate Majority Whip John Cornyn told reporters Tuesday that there’s “no decision” yet on the proposal.
But at least for now, Johnson is setting aside his concerns.
“When the president of the United States tells you that he’s going to fix your problem and he asks for your vote, I was more than willing to give it to him in [committee] here today,” Johnson said in an interview on Fox News.
Meanwhile, Sen. Susan Collins of Maine was wooed by a commitment from her leadership to pass bills outside of the tax debate that would help the poor pay their health insurance co-payments and deductibles.
Collins said the deal would help mitigate the impact of repealing the Affordable Care Act’s individual mandate in the tax bill, which would prompt fewer poor people to utilize government aid to purchase health insurance and would also drive up premiums. That repeal provision is a major reason why the Congressional Budget Office found that Americans earning less than $75,000 would eventually be worse off under the Senate bill.
Collins also said that she planned to offer an amendment that would reinstate the deduction for individual property taxes up to $10,000, similar to a hard-fought deal in the House bill passed earlier this month. To pay for the deduction, Collins said she continued to push to keep the top individual tax rate at 39.6 percent over the opposition of some Senate Republicans.
But the health care proposals could run into opposition in the House as they're considered in legislation outside the tax package. Trump has rejected paying the ACA’s so-called cost-sharing-reduction payments, and other Republicans in Congress would oppose spending billions in federal money to insurers to lower health care costs. Still, Collins appeared upbeat on Tuesday.
“I believe a lot of my concerns, it appears, are going to be addressed,” she said. “And I’m going to be given the opportunity to offer amendments on the Senate floor on these areas.”
And Sen. Bob Corker of Tennessee, who has raised objections that the Senate tax bill would increase the budget deficit by over $1.4 trillion in the next 10 years, also voted on Tuesday to pass it out of the Budget Committee. Corker said he agreed to a deal “in principle” that added a “trigger mechanism” to increase taxes if economic growth estimates weren’t “realized.” Even he acknowledged that he traded his vote in committee for something that isn’t concrete.
“While we are still working to finalize the details, I am encouraged by our discussions,” Corker said.
Corker’s proposal may not sit well with business and conservative groups, which have lobbied hard to preserve a steep, permanent corporate rate cut. The U.S. Chamber of Commerce called the idea “impractical,” and other critics joined in.
“Including a trigger mechanism in tax reform is antithetical to the principles of the unified tax framework,” Americans for Prosperity chief government affairs officer Brent Gardner said in a statement. “Such a provision would add unnecessary complexity and uncertainty into the tax code, stifle the economy and generate less revenue.”
Some of Corker’s GOP colleagues expressed opposition, too.
“I am not going to vote to implement automatic tax increases on the American people,” Sen. John Kennedy of Louisiana told Bloomberg News Tuesday. “If I do that, consider me drunk. I’m not voting for that.”