WASHINGTON ― Senate Republicans on Thursday unveiled their own version of tax reform legislation that will shower benefits on corporations and the wealthy.
The bill adheres to the basic framework laid out by congressional leaders and the White House in September, which called for cutting the corporate tax rate from 35 percent to 20 percent.
“The most excited group out there are big CEOs, about our tax plan,” White House economic adviser Gary Cohn said this week.
But the Senate version of the legislation contains several key differences from a House bill introduced last week, and it won’t be easy for lawmakers in the two chambers to reconcile their competing visions for reform.
Unlike the House bill, the Senate bill fully repeals a tax deduction that allows households to reduce their taxable income by the amount they pay for state and local taxes. Bending to pressure from Republicans in high-tax states like New York and New Jersey, House leaders retained a deduction for property taxes up to $10,000.
But in the Senate, no Republicans represent New York, New Jersey and California.
“The dynamic of that issue is obviously different in the Senate than in the House,” Sen. John Thune (R-S.D.), the GOP conference chair, told reporters about eliminating tax deductions in order to bring in more revenue. “We want to do as many base-broadeners as we can.”
The Senate legislation also has slightly different tax brackets and retains write-offs for student loan interest and adoption costs that the House bill controversially repeals. Both versions of the bill undercut tax subsidies for mortgage interest, but the Senate bill allows homeowners to continue deducting interest payments on mortgages worth up to $1 million, whereas the House bill sets a $500,000 cap.
Another crucial difference is that while the House bill cuts the corporate tax rate immediately, the Senate version delays the change to 2019, an aide said. Delaying the corporate tax cut is a gimmick that makes the bill look less costly in the 10-year budget window typically used to evaluate the revenue effects of legislation.
The bill’s cost matters because, according to budget rules Republicans set for themselves, the legislation can’t lose more than $1.5 trillion worth of revenue over 10 years. The House bill loses about that much, according to several estimates, but its provisions have been in constant flux. The House bill contains a lot of trade-offs: It loses trillions of dollars in corporate and individual income tax revenue, while replacing some of that revenue by eliminating a swath of deductions that most households use to reduce their tax burden.
A political problem for House Republicans is that because their bill gets rid of all those deductions, it’s difficult for them to say every household will get a tax cut. Their own experts on the Joint Committee on Taxation, as well as outside analysts, have said at least 1-in-5 tax filers will ultimately pay more under the plan.
One way Republicans want to avoid middle-class tax hikes is by expanding the child tax credit. The House bill increases the credit to $1,600 from its current per-child maximum of $1,000. Sens. Marco Rubio (R-Fla.) and Mike Lee (R-Utah) have pushed for expanding the credit up to $2,000, but the new Senate legislation only raises it to $1,650.
The House bill does a huge favor to extremely wealthy heirs by eliminating a tax on estates worth at least $5.49 million. The Senate bill keeps the estate tax, but doubles the amount of wealth that’s exempt. Many House Republicans have indicated they’re willing to keep the tax if it means getting the bill approved, however.
The Senate Finance Committee is scheduled to begin marking up its tax plan next week. House Republicans finished marking up their bill on Thursday and said they would vote next week.
Despite the growing fear of a Democratic wave in 2018 elections, Senate Republicans said that their crushing state and and local losses in Virginia and New Jersey on Tuesday give them more reason to pass their tax bill.
“I think if you’re going to run for office, you want to be able to point to things you’ve been able to get done,” Thune said. “And I think right now, there’s a general frustration in the country, even though we’ve gotten some things done in our agenda, some of the big ticket items remain unfinished.”
Arthur Delaney hosts the HuffPost Politics podcast: