House Republican leaders on Thursday are preparing to release their tax plan after making frantic changes Wednesday night to deal with concerns from a number of lawmakers.
The biggest change, which came late in the evening, would ensure that a reduction in the corporate tax rate from 35 percent to 20 percent extends for at least 10 years. Earlier Wednesday, the House Republican bill was expected to only lock in that lower rate for eight years before the cut expired. But Republicans cut other tax benefits in order to offset the extended rate reduction, said a person briefed on the discussions who wasn’t authorized to discuss negotiations.
A permanent cut to the corporate rate has been a central part of President’s Trump’s tax plans, and administration officials have been telling business leaders the cuts would be permanent. But on Wednesday, House Ways and Means Chairman Kevin Brady (R-Texas) said the intitial version of the bill would include only a temporary rate cut, Brady said they needed to keep it temporary, at least in the first version of the bill, to keep his legislation in line with rules Republicans need to abide by if they hope to pass the measure through the Senate without Democratic support.
The back-and-forth on the length of the corporate tax cut is the latest turn in a tumultuous rollout of the House tax measure, which was previously slated to be introduced Wednesday but is now planned for Thursday.
Brady spent Wednesday briefing colleagues on the legislation in the hopes of resolving differences. But the day took a different turn, as Trump interjected a previously rejected idea into the process, and certain lawmakers from New York and New Jersey refused to accept a compromise.
Trump on Wednesday called on Republicans to add a provision to the tax bill that would repeal part of the Affordable Care Act in a way that he said would allow them to cut more taxes. Trump’s comments came in a Twitter post and were posted a few minutes after Sen. Rand Paul (R-Ky.) mentioned the same idea on Fox News.
“The House and Senate should consider ASAP as the process of final approval moves along,” Trump wrote on Twitter.
Many House and Senate Republicans have said they want to repeal the Affordable Care Act, but they have failed several times in the Senate, and some expressed concern that Trump’s new idea could end up overwhelming the delicate discussions they are hoping to complete by the end of this year.
Three Republican members of the Ways and Means Committee and a GOP leadership aide, speaking on the condition of anonymity to describe internal deliberations, said that there has been serious discussion about including the individual mandate repeal in the tax bill. But they said that the committee is divided on the issue and that it is unlikely to be included in the initial draft.
Including the repeal — which was estimated by the Congressional Budget Office last year to create $416 billion in deficit savings — could allow the tax writers to accomplish other goals they would otherwise have to reject for fiscal reasons. But given that the CBO also projected the provision would raise insurance premiums and lead to 15 million more uninsured, it would inject a potentially explosive new element into legislation that is already on a political tightrope.
“I can’t imagine why they think that helps,” said Rep. Charlie Dent (R-Pa.), who has been supportive of the tax bill but voted against the recent GOP efforts to repeal the ACA.
“Everything has moved way too far beyond it to throw anything [health-care-] related into the mix right now,” said Rep. Chris Collins (R-N.Y.). “We don’t need another complication.”
Trump’s Twitter post appeared to be more of a passing idea than a strategic change in policy, as White House press secretary Sarah Huckabee Sanders dismissed it several hours later, saying the Trump administration was focused on passing the tax cuts and any changes to the Affordable Care Act separately.
“We are focused on pushing through tax cuts and tax reforms separately” from health-care changes, she said.
Brady has kept many of the bill’s details under wraps, but broadly, Republicans aim to slash the corporate tax rate, simplify the tax filing process for families and individuals, and create a new system for taxing what businesses earn overseas. Republicans are trying to design the bill in a way that adds no more than $1.5 trillion to deficits over 10 years, but this is proving problematic because they have promised more than $4 trillion in cuts and failed to identify many ways to recoup new revenue.
House Republican leaders have pressed the White House to help them in selling the tax cuts politically but to stay out of the negotiating process, worried that interference could scuttle progress.
Democrats are also preparing for a fight, trying to paint the GOP tax push as a way to help businesses and the wealthy but raise taxes on the middle class. The true impact of the bill still can’t be measured because key details haven’t been released, but that could change when the House measure is proposed on Thursday.
As of late Wednesday, House Republican leaders were still struggling to corral enough support from Republicans in New Jersey and New York to ensure they could pass the measure on the House floor. Many Republicans from those states have objected to a proposal that would eliminate the ability of Americans to deduct their state and local taxes from their federal taxable income.
New York, New Jersey, and a number of other states have higher taxes, and the ability to deduct these taxes from federal income saves people a lot of money. GOP leaders have tried to convince these members that lowering tax rates, which is part of the plan, would help offset the state and local tax issue, but many members remain unconvinced. This week, Brady agreed to allow people to continue deducting their real estate property taxes from their federal income, but they would still be prohibited from deducting their state income tax.
Several members said Wednesday that Republicans were looking at capping the property tax deduction at around $10,000, though discussions remained fluid. Still, several members said the changes weren’t sufficient. If enough Republicans refuse to accept the adjustment, they could oppose the bill and potentially kill it on the House floor.
But even the property-tax compromise offered by Brady is making other parts of the bill problematic for GOP leaders. By allowing people to deduct their property taxes, it reduces the amount of revenue they will recoup. That means they need to find new ways to raise revenue. Lawmakers were eyeing changes to the 401(k) retirement program as one way to raise new revenue, but this program is very popular with millions of Americans and Trump has already cautioned them to leave 401(k) accounts alone.
Meanwhile, Republican leaders were struggling to fulfill perhaps the biggest promise Trump has made in the bill — a huge reduction in the corporate tax rate from 35 percent to 20 percent. GOP leaders have found that permanently lowering the rate to 20 percent is almost impossible because it would lead to such a dramatic reduction in future revenue that it probably could not comply with Senate rules.
GOP leaders were looking at the possibility of having the reduced rate expire after a number of years to comply with Senate rules, but this could draw the ire of the White House. Deliberations on this issue dragged on Wednesday as Brady met with colleagues throughout the day.
Making the tax cuts permanent is “our goal, and I think it’s going to take several steps through the process to achieve that,” Brady told reporters. “We have as you know . . . those awfully funny Senate . . . rules, so that will enter into the discussion.”
But there were signs that other issues also had the potential to derail the bill, particularly as House leaders hope to push the bill through votes so quickly. Rep. Mark Meadows (R-N.C.), chairman of the House Freedom Caucus, a group of the chamber’s most conservative members, said he was very concerned about restrictions the House GOP bill might place on the ability of some companies to take advantage of lower tax rates, particularly if they pay their taxes through the individual income part of the tax code.
“I’m on ‘alert level four’ right now,” he said.