POLITICS
12/19/2017 02:29 pm ET Updated Jan 22, 2018

Republicans Pass Deeply Unpopular Tax Cuts (Again)

The House revoted on the bill after the Senate passed a corrected version.

WASHINGTON ― After years of false starts and failed promises ― including another one Tuesday when House Republicans passed a tax bill with provisions that were struck down by the Senate parliamentarian ― House Republicans once again passed the final version of the GOP tax bill Wednesday, sending the bill to President Donald Trump’s desk.

Even though House Republicans had already passed a nearly identical form of this bill, and had already congratulated themselves in a series of speeches Tuesday, the House voted again Wednesday, 224-201, to pass the tax bill, this time with the stricken provisions omitted.

The Senate passed this version of the bill on a party-line, 51-48 vote early Wednesday morning.

House Republicans had passed what they thought would be the final tax proposal on Tuesday, 227-203, with 12 Republicans voting no. The bill passed Wednesday with the same 12 Republicans voting no, but with three absences on the GOP side and four absences on the Democratic side.

It was a small gaffe that led House lawmakers to need to vote again, but one typical of this process. Republicans rushed a bill to the floor and ended up embarrassing themselves.

Still, the hiccup was just a formality. Even though the Senate parliamentarian struck down college savings provisions benefiting home-schooled children ― a provision important to Sen. Ted Cruz (R-Texas) ― the bill still flew through the Senate late Tuesday night into Wednesday morning and had no trouble on Wednesday in the House.

The bill is, without a doubt, Trump and the GOP Congress’s most significant legislative achievement since Republicans gained control of the House, Senate and White House.

But the “win” may end up costing Republicans. This bill is far from the congressional victory Republicans had sought to run on during next year’s midterm elections: It’s deeply unpopular, with approval ratings that were already significantly under water and grew worse over the past few weeks as the legislation neared final passage.

A CNN poll in November showed 31 percent of voters viewing the tax bill favorably, with 45 percent opposing it. A poll conducted in the past week showed 33 percent supporting the bill, but 55 percent now against it.

Speaker Paul Ryan (R-Wis.) told reporters Tuesday morning that he had "no concerns whatsoever" about the popularity of the ta
Andrew Harrer/Bloomberg via Getty Images
Speaker Paul Ryan (R-Wis.) told reporters Tuesday morning that he had "no concerns whatsoever" about the popularity of the tax bill.

When Senate Republicans passed their initial version of the measure just a few weeks ago, many Republicans didn’t care that the bill wasn’t popular. Republicans simply believed the lack of support was due to bad polling and voters not fully understanding the proposal.

Likewise, Speaker Paul Ryan (R-Wis.) told reporters Tuesday morning that he had “no concerns whatsoever.”

“I got to say, if people are out there on TV telling mistruths, disguising the facts of this thing, that’s going to make it unpopular,” Ryan said, adding that taxpayers will be happy when they see changes in their pay next year ― both from adjustments to taxes withheld from their paychecks and higher pay from booming business conditions.

But the facts of this bill are what make it unpopular. For one, the bill repeals the individual mandate in Obamacare, which would result in higher prices for people relying on Obamacare for health insurance. And far from a “middle-class tax cut,” as Trump and other Republicans promised, the measure is truly a massive corporate tax cut ― the top rate goes down from 35 percent to 21 percent ― and a smaller tax cut for individuals in the seven individual income brackets.

Independent analysts have said wealthy taxpayers would benefit the most, in large part because they pay more taxes from the start. But households at every income level would see a tax cut next year, according to an analysis of the conference bill from the Joint Committee on Taxation, which scores tax legislation for Congress.

Starting in 2021, however, some income groups would start seeing slightly higher rates. And because the proposal sets most individual cuts to expire in eight years ― a budget gimmick to reduce the bill’s cost in a 10-year budget window ― all households earning less than $75,000 would see higher taxes in 2027 (due in large part to the bill including an unfavorable permanent change to the way tax brackets are indexed to inflation)

Republicans have waved off concerns about the sunsetting tax cuts by saying a future Congress won’t let them expire. That’s a change from Ryan’s position earlier this year, when he insisted the cuts be permanent. In the end, Ryan got half his way ― the corporate tax cuts are permanent, but the individual reductions are not.

Republicans finance these cuts, in part, by raising taxes on some people. The bill ends much of the state and local tax deduction, which lets filers write off the cost of their local taxes. As a compromise to some of the high-tax states most affected, the bill allows filers to deduct up to $10,000 of their local taxes by some combination of their choice. But that won’t be enough for many high-income people in states like New Jersey, New York and California.

As with an earlier version of the bill, a number of Republicans from New Jersey and New York voted against the legislation, though most California Republicans still got onboard.

Republicans chose a policy approach that came with a built-in political headache: They have been unable to guarantee that no household would face higher taxes under the plan even as it piles on all that debt.

If their bill simply cut tax rates, everybody would benefit. But because of the way the bill lowers rates while eliminating deductions ― thereby exposing more income to taxation in some cases ― Republicans have been unable guarantee a tax cut for everybody. So even though most households would be better off under the changes next year, some will be worse off.

Still, the majority of the bill is “paid for” by increasing deficits. The measure would add $1.4 trillion to the national debt, the Joint Committee on Taxation said. Republicans have claimed that increased economic growth would boost business receipts and offset the revenue loss, though no credible economic analysis has shown that.

Republicans have largely ignored those criticisms by just focusing on how the tax cuts would boost the economy. They’ve also largely looked past the effects on housing, charitable giving and state budgets.

Those effects flow from a simplification of the tax code. The legislation would increase the standard deduction from $12,700 to $24,000 for a married couple (an increase Republicans have falsely characterized as “doubling” the deduction). Currently, only about 30 percent of households find it worthwhile to “itemize” for expenses such as mortgage interest, charitable donations and local taxes. With the bigger standard deduction, experts say only 5 percent would.

While their tax filing process would be simpler, for many households, the tax incentive to take out a bigger mortgage or donate to charity would be smaller, which could squeeze housing markets and the nonprofit sector. And a new cap on the amount of local taxes that can be deducted would put pressure on state lawmakers to either reduce those taxes ― resulting in less revenue for priorities like public education ― or shift them to other sources that are still deductible, such as business payrolls.  

“Don’t be a high-tax state,” Rep. John Shimkus (R-Ill.) said after the vote. “Be a low-tax state “

According to Sen. Ron Wyden (D-Ore.), the Senate parliamentarian said three provisions were ineligible for the fast-track process, including one measure allowing parents to use special 529 savings accounts for home-schooling expenses. 

“In the mad dash to provide tax breaks for their billionaire campaign contributors, our Republican colleagues forgot to comply with the rules of the Senate,” Wyden and Sen. Bernie Sanders (I-Vt.) said in a joint statement. 

The lead House author of the bill, Rep. Kevin Brady (R-Texas), has said he expects Congress will need to pass another bill next year to fix any mistakes in the tax bill

This article has been updated to reflect the Senate vote and second House vote on the bill and to include post-vote reactions.

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