Harless Tax Blog

Harless Tax Blog

Tax debate update: Republicans grapple over trigger provision

Monday, December 04, 2017

Source: accountingtoday.com

The Senate tax bill is headed for a marathon debate this week after Republican leaders brought the measure to the floor Wednesday with the goal of holding a final vote by the end of the week. Here are the latest developments, updated throughout the day:

John McCain Says He Will Support Senate Bill
Republican John McCain of Arizona said in a statement Thursday that he’s decided to support the Senate tax bill.

“I believe this legislation, though far from perfect, would enhance American competitiveness, boost the economy, and provide long overdue tax relief for middle class families,” McCain said.

McCain hadn’t taken an official position on the tax plan until now—and no one was taking his vote for granted after he shocked the political world by voting against a rushed attempt to demolish the Affordable Care Act this summer.

The lawmaker has pushed for the Senate return to regular order—hearings, markups, bipartisan input and amendments—for passing major bills, including tax legislation.

McCain has a mixed record on tax cuts, voting against measures in 2001 and 2003, citing deficit concerns.

“I take seriously the concerns some of my Senate colleagues have raised about the impact of this bill on the deficit,” McCain said. “However, it’s clear this bill’s net effect on our economy would be positive.”

Collins Says ‘Not Committed’ on Bill Yet
Republican Senator Susan Collins of Maine said it “would be very difficult” to support the Senate tax bill unless Congress agrees to preserve an individual deduction for state and local property taxes and passes separate legislation to support the individual health care market.

“I am not committed to voting for this bill,” she said during a breakfast session organized by the Christian Science Monitor. She has said that Senate Majority Leader Mitch McConnell has committed to making health care legislation a priority.

Collins also said she’ll pursue an amendment to enhance the child tax credit—and pay for the revenue cost by ending the “carried interest” tax break that favors investment managers. Carried interest is the portion of an investment fund’s profit—usually 20 percent—that’s paid to investment managers. Currently, it’s taxed as capital gains, meaning it qualifies for a tax rate as low as 23.8 percent. The top individual tax rate is currently 39.6 percent.

The Senate bill would address carried interest by requiring that only gains on assets held more than three years—up from one year—would qualify for the break. Collins called that provision “modest.”

Collins’s health-care concerns center on the Senate bill’s provision to repeal the Obamacare law’s individual mandate, which requires individuals to buy health insurance. Repealing the provision is estimated to save the federal government more than $300 billion over 10 years and result in roughly 13 million fewer insured people.

On the property-tax deduction, Collins said she’s seeking a provision that would mirror the House bill approved earlier this month: retaining the break for property taxes, but capping it at $10,000. Currently, the Senate bill proposes to abolish deductions for all state and local taxes.

Corker Says Trigger Deal Still Facing ‘Difficulties’
Senate Republicans are looking to approve their tax-overhaul legislation as soon as Thursday night—but wrangling continues over whether to include a trigger for tax increases if economic growth doesn’t meet revenue targets.

“They’re having a few difficulties but hopefully in the morning they’ll have something,” Senator Bob Corker of Tennessee, who’s pushing for the trigger mechanism, said Wednesday evening. “There’s nothing to show right now.”

Corker and Republican Senator Pat Toomey of Pennsylvania are negotiating over the trigger concept, according to Senate Majority Whip John Cornyn of Texas. Corker and Toomey, both members of the Budget Committee, reached an agreement in September that allowed a budget that would add to the deficit.

Toomey said a deal would be announced Thursday, but declined to provide details.

Corker, along with Arizona Senator Jeff Flake and Oklahoma Senator James Lankford, have said their votes are contingent on the tax trigger. Others, like Senator Thom Tillis of North Carolina have said they are wary of the effect on the economy of tax increases during a recession.

While Senate Finance Chairman Orrin Hatch said he thought it was likely a trigger would be included, Senator David Perdue of Georgia countered that, saying: “There is no foregone conclusion that we will have a trigger. Because there is a debate going on about that.”

“We’re not going to do anything to jeopardize this bill,” Perdue said.

In addition to deciding whether or how to include a future tax increase if revenue targets aren’t met, Republicans may have to tweak or add other provisions during the next 24 hours or so to secure the votes they need. Another change in the works would deepen the tax cut for pass-through businesses such as partnerships and limited liability companies.

All 52 Senate Republicans united to vote to open debate on the $1.4 trillion tax-cut measure Wednesday in the latest sign that the bill has the momentum it needs to pass. Republicans must have 50 of their 52 members vote “aye” in order to send the bill to a planned House-Senate conference, the next step in GOP efforts to get tax legislation to President Donald Trump by the end of 2017.

The Senate is now spending 20 hours of limited debate time on the tax bill. During that period, Democrats may try to strip out parts of the bill by raising objections to them based on Senate rules. Republican staff members have been working to tweak tax and oil-drilling provisions in the bill to comply with rules meant to exclude provisions that aren’t primarily fiscal in nature.

The formal debate time is set to expire close to midnight on Thursday, after which an unlimited amendment vote series known as “vote-a-rama” would ensue. Senators could agree to speed up the debate and start the amendment votes sooner.

During vote-a-rama, Democrats are likely to offer numerous amendments meant to highlight any flaws they believe the bill contains. Democrats say the bill gives most tax benefits to the wealthy while raising taxes on many in the middle and working class, in addition to increasing budget deficits.

“What’s on offer is a plan to force working people and middle-class families to pay for handouts to corporations and tax cheats," said Democratic Senator Ron Wyden as debate kicked off Wednesday evening.

Republican Senator Mike Enzi, chairman of the Budget Committee, disputed that characterization. “We need tax reform that will make our system simpler and fairer and allow people to keep more of what they earn,” he said. “This bill before us would do that.”

Some Republicans are expected to offer amendments that would be paid for by setting the corporate rate higher than the 20 percent proposed in the Senate tax bill. The current corporate rate is 35 percent.

Moderate GOP Senator Susan Collins filed an amendment that would retain the individual deduction for state and local property taxes and cap it at $10,000 for individuals—mirroring the House tax bill. She said she would pay for the change with a 21 percent corporate rate and by keeping the individual top rate at 39.6 percent.

“I think it’s significant that many members believe that we don’t need to go all the way to 20 percent in order to spur investment and job creation,” Collins said.

Republican senators Mike Lee and Marco Rubio also plan to make the bill’s child tax credit refundable up to 15.3 percent of earnings, paid for with a 22 percent corporate rate.

Behind the scenes, Republicans will be crafting a final substitute amendment containing any changes they’ll need to get the required 50 votes.

Wavering senators Steve Daines of Montana and Ron Johnson of Wisconsin appear to be on track to support the bill after securing a 20 percent deduction for pass-throughs, an increase from the 17.4 percent in the draft bill. Johnson said Wednesday he expects to see the larger deduction included in the final version of the Senate legislation. He added he would support an amendment calling for the elimination of state and local tax deductions for corporations.

Trackback Link
http://www.harlessandassociates.com/BlogRetrieve.aspx?BlogID=14763&PostID=1000309&A=Trackback
Trackbacks
Post has no trackbacks.