Drama erupted on the Senate floor in the middle of the tax debate Thursday evening, as three Senate Republicans threatened to send the GOP tax bill back to the committee, in a move that would have stalled the bill’s momentum for weeks.
The tension boils down to a very simple reality: Republicans have a tax bill that makes deficit hawks like Sens. Bob Corker (R-TN) and Jeff Flake (R-AZ) very uneasy. On its face, the proposal, which gives corporations a massive tax cut, will increase the deficit by $1.4 trillion in 10 years — or, when adjusted for economic growth, by $1 trillion, according to the Joint Committee on Taxation.
So on Thursday, Flake and Corker, who want to ensure a more fiscally conservative tax bill, and Sen. Ron Johnson (R-WI), who has been arguing for more tax breaks for “pass-through” businesses, withheld their votes for the greater part of an hour on a Democrat-supported motion from independent Sen. Angus King (ME) to send the bill back to committee for negotiations. In the end, Corker, Flake, and Johnson all voted with their own party and kept the tax bill alive, but the moment signaled a major vulnerability in Republicans’ plans to pass this tax bill.
There are a lot of reasons it’s so difficult to make the math work, but one is that Republicans have insisted on lowering the corporate tax rate from 35 percent to 20 percent. That’s a lot of revenue to make up based simply on economic growth projections.
For the past week, Corker and Flake have been trying to negotiate a “deficit trigger” for the tax bill; if the rosy deficit forecasts from this tax bill prove to be inaccurate, and the economy does not grow as fast as Republican leaders are saying it will, then they want a trigger mechanism in place to in some way address that.
But their idea has hit a snag when the Senate parliamentarian — the person in charge of ensuring the tax bill complies with Senate budget rules — said a “trigger” would break Senate rules.
So now, Corker said, they’re seeking tax increases in the bill — likely targeted at corporations. There’s still no consensus on how much in tax increases, although there are some reports that Corker is looking for more than $350 billion worth, which is a substantial ask for a Republican Party that has been reluctant to make sweeping changes elsewhere to pay for the corporate tax cuts.
It has all made for a tense moment in the final hours of this tax debate in the Senate. At one point, Majority Whip Sen. John Cornyn (R-TX) was heard telling King that his motion was “wrong” and “designed to kill the bill.” Several senators speculated there would be many more of these tense exchanges.
Even so, there’s still optimism this bill will pass.
“I think you’re gonna see a lot of these scrums, and here’s the way they’ll end: We’ll pass the bill sometime tonight,” Sen. Lindsey Graham (R-SC) told reporters after the vote.
This tax bill is coming down to the deficit hawks — and Ron Johnson
As Senate Republicans barrel toward a tax vote, it’s the lawmakers worried about the national debt who pose the biggest barrier to the tax bill’s passage.
The result has been a last-minute scramble to find a fix without a clear idea what that fix will be.
"Anything you've heard you can take off the table, because it's evolving," Corker told reporters Wednesday night. The sentiment hadn’t changed much by Thursday night, when Republicans are expected to take a vote on the tax bill.
Cornyn suggested that there were discussions of a “stairstep” in the corporate tax rate, which would gradually increase revenues over time. There was also a report of adding a new alternative minimum tax on corporations and high-income people.
While these ideas are sure to ruffle the Republican ranks, there appears to be a general sentiment that Corker must be appeased.
Corker has said he will not vote for a tax plan “adding one penny to the deficit.” A member of the Senate Budget Committee who recently announced his retirement from the Senate in 2018, Corker wants to stay true to his deficit hawkishness — even though the party seems to be signaling that the deficit should not stand in the way of slashing individual and corporate tax rates.
There’s already a deficit trigger in place that Republicans are ignoring
The Congressional Budget Office has said a $1.5 trillion tax bill would trigger a sequestration across some major mandatory spending programs, like Medicare, federal student loans, and agriculture subsidies, and even some funding for customs and border patrol — unless Congress passes a law to stop it.
It all comes down to the “pay as you go,” or PAYGO, rule — a 2010 law that says all passed legislation cannot collectively increase the estimated national debt. In other words, if Republicans want to pass a tax cut, they have to pay for it with mandatory spending cuts — or, inversely, if Congress boosts funding for entitlement programs, it has to increase taxes.
If Congress violates this law, the Office of Management and Budget, which keeps the deficit scorecard, “would be required to issue a sequestration order within 15 days of the end of the session of Congress to reduce spending in fiscal year 2018 by the resultant total of $136 billion,” the CBO said in a letter to Minority Whip Rep. Steny Hoyer (D-MD).
Because PAYGO is a law, Congress would have to pass another law to change it. They aren’t allowed to do this through budget reconciliation — meaning Republicans would need to get at least 60 votes in the Senate to mitigate this sequestration. Already they have made clear that they aren’t interested in allowing a sequestration.
So in a bizarre twist, Republican leaders are bending over backward to try to win the votes of deficit hawks on the tax bill, but would still have to bypass a separate deficit management trigger that was put in place to stop massive tax cuts from passing without offsets to avoid a sequester.