WASHINGTON (AP) — Republicans drove a near $1.5 trillion tax overhaul toward House passage Thursday, even as Senate GOP dissenters emerged in a sign that party leaders had problems to resolve before Congress could give President Donald Trump his first legislative triumph.
Trump was heading to the Capitol for a pep rally with House Republicans, shortly before the chamber was expected to approve the measure over solid Democratic opposition. There were just a handful of GOP opponents in the House, unhappy because the measure sharply curbs deductions for state and local taxes, but all agreed that passage seemed certain.
Like a similar package nearing approval by the GOP-led Senate Finance Committee, most of the House measure’s reductions would go to business. Both bills would slash the 35 percent corporate tax rate to 20 percent and reduce levies on millions of partnerships and certain corporations, including many small businesses. Personal income tax rates for many would be reduced though some deductions and credits would be reduced or eliminated, but in the process projected federal deficits would grow by $1.5 trillion over the coming decade.
As the House debated its measure, Democrats called the measure a gift tilted disproportionately toward corporations and the wealthy that would leave millions of people actually paying higher taxes. Republicans said that average taxpayers across all income groups would get tax reductions.
Rep. Jeb Hensarling, R-Texas, said the GOP plan would create “a fairer, flatter, simpler, more compact” tax code that would boost the economy. He said that left Democrats relying on “the politics of division, envy and class warfare.”
“We’ve seen this trickle-down medicine side show before,” said Rep. Lloyd Doggett, D-Texas. “It didn’t work then, it won’t work now. All they’re doing is grabbing for a political life preserver after 10 months of Republican failures.”
Eager to act before opposition groups could sow doubts among the rank-and-file, Republican leaders were anxious to hand Trump the first crowning achievement of his presidency by Christmas.
But on Wednesday, Sen. Ron Johnson of Wisconsin became the first Republican senator to say he opposes his party’s tax package, though he didn’t rule out coming on board if changes were made.
Johnson complained the bills were more generous to publicly traded corporations than to so-called pass-through entities. Those are millions of partnerships and specially organized corporations whose owners pay levies using individual, not corporate, tax rates. While details of the House and Senate bills differ, many pass-through owners would owe more than 20 percent in taxes for much of their income.
Republicans controlling the Senate 52-48 can approve the legislation with just 50 votes, plus tie-breaking support from Vice President Mike Pence. With solid Democratic opposition likely, that means they can lose just two GOP votes.
Besides Johnson, Republican Sens. Susan Collins of Maine, Jeff Flake and John McCain of Arizona, Bob Corker of Tennessee and Lisa Murkowski have yet to commit to backing the tax measure.
Collins expressed concerns about a provision added to the Senate measure that would repeal President Barack Obama’s health law requirement that people buy coverage or pay a fine. The nonpartisan Congressional Budget Office has projected that would result in 13 million more uninsured people by 2027. She was also unhappy with the Senate bill’s elimination of all deductions for state and local taxes.
Repealing the health law’s individual mandate would save $338 billion over the coming decade because fewer people would be pressured into getting government-paid coverage like Medicaid. Senate Finance Committee Chairman Orrin Hatch, R-Utah, used the savings to make his bill’s personal tax reductions modestly more generous.
Another provision in the Senate plan would end the bill’s personal income tax cuts in 2026.
That proposal, derided by Democrats as a gimmick, was designed to pare the bill’s long-term costs. Legislation cannot boost budget deficits after 10 years if it is to qualify for Senate procedures barring bill-killing filibusters. Those delays take 60 votes to block, numbers Republicans lack.
The Senate Finance panel was on track to approve its proposal by week’s end.
A small group of House Republicans largely from New York and New Jersey rebelled because the House plan would erase tax deductions for state and local income and sales taxes and limit property tax deductions to $10,000.
Their numbers seemed insufficient to derail the bill. Asked if they could stop it, Rep. Peter King, R-N.Y., shook his head and said, “I don’t think so.”
The House measure would collapse today’s seven personal income-tax rates into four: 12, 25, 35 and 39.6 percent. The Senate would have seven rates: 10, 12, 23, 24, 32, 35 and 38.5 percent.
Both bills would nearly double the standard deduction to around $12,000 for individuals and about $24,000 for married couples and dramatically boost the current $1,000 per-child tax credit.
Each plan would erase the current $4,050 personal exemption and annul or reduce other tax breaks. The House would limit interest deductions to $500,000 in the value of future home mortgages, down from today’s $1 million, while the Senate would end deductions for moving expenses and tax preparation.
Each measure would repeal the alternative minimum tax paid by higher-earning people. The House measure would reduce and ultimately repeal the tax paid on the largest inheritances, while the Senate would limit that levy to fewer estates.