Two things are holding congressional Republicans back from passing a tax overhaul: policies that are in the House- and Senate-passed bills, and policies that aren’t.
It may sound simplistic, but before negotiators could get around to refining tax policy, House Republicans had to spend Monday and Tuesday establishing the field of play.
Fair game are tax provisions that need to be reconciled between the two chambers, such as preserving the alternative minimum tax and setting a timetable for cutting the corporate rate. Extraneous measures, however, are out of bounds—namely an end-of-year spending bill, health care legislation, and the legal status of undocumented immigrants who came to the United States when they were children.
House Freedom Caucus members drew a hard line on the latter measures—and that could complicate Senate passage, considering that Senate Majority Leader Mitch McConnell made assurances to key senators in order to pass his bill.
“They’re already conditioning their tax vote on other things,” Rep. Scott Perry, a Freedom Caucus member, said of senators.
So in the Tuesday morning meeting of House Republicans, Perry said he took the microphone and told leadership, “‘We agree, generally speaking, on certain things, but there are some unknowns here. We need to know what the limit is. We need to know how far you’re willing to go.’”
The conservative backlash came in response to deals that Sens. Susan Collins and Jeff Flake made in exchange for supporting the tax bill. Collins got assurances that Senate leaders would back a pair of bipartisan health care measures that would, in part, pay Obamacare’s cost-sharing reductions. Flake got vague assurances that Congress would deal with the immigration measure.
House conservatives, however, want to make sure none of those things would pass as an add-on to end-of-year spending legislation. So in the Tuesday morning meeting, they announced they would withhold their support for the spending bill coming to the floor later this week unless leaders promised none of those measures would be added to the continuing resolution.
“We just wanted separate, rational policy. We didn’t want these two conflated. So Collins and the Senate [are] trying to link her vote on tax to CSR in the budget—well, I don’t like that bank shot, and that’s not in the Republican platform,” Rep. Dave Brat said.
Whether the House can pass Collins’s preferred health policy is unclear—which leaves open the question of whether Collins would support a tax bill without the health care measures, including one originally authored by Sens. Lamar Alexander and Patty Murray.
Differing with Freedom Caucus members, Rep. Phil Roe said that measure could pass depending on whether it becomes part of a larger deal.
“I think Alexander-Murray puts a question mark on the House. … I think it would be close,” Roe said. “Some people will probably be opposed to any subsidies out there, but you’ve got to look at the whole picture, what the tax bill looks like—individual mandate’s gone.”
Others in the House said they aren’t explicitly opposed to bringing up Collins’s CSR deal, but called for their own health care-related provisions in return.
“I’m sorry; with all due respect to the senator and everybody else, I’m not voting for anything like that unless there’s a concession that I think is appropriate for that level of commitment, and what they’ve offered so far to me isn’t,” House Deputy Majority Whip Tom Cole told reporters Monday night. “And, speaking as a whip, I don’t think you could sell it.”
With little margin for error, every vote will be important. And while those extraneous provisions are problematic enough for House conservatives, their concerns extend beyond the gamesmanship in the Senate. Several members said they have material issues with both the House and Senate versions of the tax bill that may need to be ironed out as members enter a conference committee to resolve the two.
Most of those extend not only to the way the Senate chose to pay for its steep tax cuts, but for the last-minute concessions designed to bring on holdout senators such as Collins and Ron Johnson. For his vote, Johnson secured a compromise to increase the income deduction for pass-through entities—businesses that pass on their profits to the owners for tax purposes—from 17.4 percent to 23 percent in the Senate bill.
Changing those hard-won Senate deals in the conference committee could imperil the broader tax plan if a final version returns to the Senate. Alternately, eliminating key pay-fors such as the AMT or the corporate-rate delay could again cause the bill to run up against fiscal constraints in the Senate.
The Senate tax bill delays a cut in the corporate rate from 35 percent to 20 percent for one year, meaning that it would start in 2019. That’s potentially a no-go for some members.
“I think delaying the start of the corporate income tax is idiotic beyond belief,” Cole said. “It will encourage a lot of people into tax avoidance, and it will slow down recovery. So that’s one where I think clearly we have the better idea, but that’s what you have a conference for.”
The conservative Republican Study Committee’s chairman, Rep. Mark Walker, said Monday his caucus will fight for permanency in any tax cuts. Many individual breaks in the Senate plan expire in 2025, and a provision allowing businesses to fully deduct the cost of certain expenses would phase out after five years. Walker also criticized the corporate-rate delay and the Senate’s preservation of the estate tax.
House Freedom Caucus Chairman Mark Meadows said Monday that he opposes the Senate plan to preserve the corporate and individual alternative minimum tax, another pay-for inserted into the bill at the 11th hour. His caucus also opposes the corporate-rate delay or any attempt to diminish the proposed corporate-rate cut to 20 percent.
House Republicans and Democrats announced conferees for the tax bill Monday night, drawn largely from the tax-writing committee, and the Senate is likely to appoint its members soon. Leadership is still sticking to its self-imposed deadline to finish the bill by the end of the year, which they hope will prevent any more Senate horse-trading from complicating House passage.
“The longer we go, the more time the Senate can create mischief,” House Speaker Paul Ryan said during a press conference with reporters Tuesday.