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House Republicans passed their tax reform plan Thursday afternoon 227-205 — on a day marked by a visit from President Donald Trump — with only 13 Republicans voting against it.
It was a big day for House Speaker Paul Ryan. On the surface, the proposal, which dramatically cuts taxes for corporations, doubles the standard deduction, and consolidates the individual tax rates, among other changes, has moved swiftly through the House without much drama. “This is Ryan’s bill,” Rep. Pete Sessions (R-TX) told reporters.
But behind the cheers and celebration, there’s a clear sense that this vote doesn’t say much about the state of tax reform as a whole — a debate that, despite the insistence of Republican leadership and their allies, is still unresolved.
As the House passed its bill, on the other side of the Capitol Building the Senate continues to mark up its own tax reform proposal — one that looks very different from the House’s.
“It is interesting to me that the ‘Big Six’ worked for nine months on getting on the same sheet of music on tax reform, and [to] have it be this dynamically different as it is rolled out — it’s a bit of a surprise,” Rep. Mark Meadows (R-NC) told Vox of the group of top senators, House members, and Trump administration officials who brainstormed a framework for tax reform.
Going into the vote, House leadership told lawmakers not to bash the Senate tax bill — a move that has made some feel like the plan is to adopt a lot more of the Senate bill. Already, some of the differences are making House Republicans grumble. The Senate fully repeals the state and local income and property tax deduction, cuts health care, and sunsets tax relief for individual Americans in order to pay for corporate tax cuts.
“You’re rewriting a tax code for a generation, and you are doing it in 10 days, and then to be dismantling health care without any debate at all could have unintended consequences,” Rep. Peter King (R-NY), who voted against the House bill, said. “In [1986] it took two years to put together a tax reform bill; they’re doing it in 10 days.”
We still don’t know exactly what tax reform will look like — but Republicans are moving fast
“It seems to be pretty significant differences,” King told Vox Wednesday of the House and Senate tax reform proposals.
“Especially because you have to get it done in such a short amount of time. Any changes to the tax bill has significant consequences,” he continued.
The day before the House vote, some members cast last-minute doubts on the math, HuffPost reported, questioning whether the typical family of four would actually get an average cut of $1,182, as Republican leadership keeps touting.
There’s no question that Republicans have been grappling with a major math problem with their tax bill, searching for budget gimmicks and rosy analyses to make the proposal add up and comply with the Senate budget rules. The House’s bill fails to hew to crucial Senate budget rules — making the proposal untenable in the upper chamber. Members seem to be aware of this dilemma.
“My must-changes are I just want the math to work,” Rep. David Schweikert (R-AZ) said of bringing the House and Senate bills together.
The math solutions in the Senate have proved politically difficult.
The Senate bill leaves many of the deductions the House repeals untouched, and instead repeals Obamacare’s individual mandate, phases in the corporate tax cut, increases the child tax credit, fully repeals the state and local tax deduction, keeps the seven tax brackets — instead of the House’s four — and sunsets almost all of the tax relief for individual Americans by 2025.
By Wednesday, one senator, Ron Johnson (R-WI), had already come out against the Senate’s bill, saying it helped corporations more than small businesses and families. Several more crucial senators have been tight-lipped about their feelings. A recent distributional analysis from the Joint Committee on Taxation found that the Senate’s proposal, which sunsets the individual tax reforms to pay for a corporate tax cut, would raise taxes on the poor by 2021 and across the board in 2027.
Are corporate tax cuts enough to keep Republicans together? It’s starting to look like it.
There is one policy that is unifying the Republican ranks: They really want to cut the corporate tax rate. It’s the centerpiece of every plan they have released in both the House and the Senate, and they’ve spent weeks floating wildly unpopular ways to pay for it.
“It’s in all of our best interest to have these tax cuts for corporations so that they will have more money to invest in their business and pay their workers,” Rep. Mike Conaway (R-TX) told Vox.
Lowering the corporate tax from its current 35 percent to 20 percent, as Republicans are proposing, is costly — in the context of the current bill, the Joint Committee on Taxation estimates it would cost $1.33 trillion over 10 years. Republicans argue that this cost will be partially offset through incredible economic growth — pushing corporations to invest more in their workers and bring more jobs back to the United States. And most economists believe that temporary corporate cuts do little or nothing to boost economic growth, because corporations can’t count on the cuts in the future.
So even the most vulnerable Republican lawmakers from states like New York, New Jersey, and California that are adversely impacted by both the House and Senate proposals to pay for the permanent corporate tax cut are prioritizing doing so.
“Overall there is much more substantive tax policy that is in agreement,” Rep. Tom Reed (R-NY) said of the ideology behind the Senate and House bills, making a case for a permanent corporate tax cut. “From a growth perspective on the business side, the less you can rely on having a long-term planning capability and making those investments long term, I would say that has a little more negative impact.”
Still, corporate rate cuts also have a lot of potential to be politically expensive.
Sixty percent of registered voters think corporations pay “too little” in taxes, according to a September poll from Morning Consult and Politico surveying a little under 2,000 Americans. A more recent Morning Consult/Politico survey from October found only 39 percent of Americans think lowering the corporate tax rate should be part of the tax plan — with 59 percent of Republican voters supporting it. Another poll from Pew Research Center showed that 53 percent of Republicans think corporate tax rates should either be raised or stay the same.
As individual tax benefits go on the chopping block in order to pay for these corporate tax breaks, Republicans will be under more pressure to break from this framework.
So far, however — at least for those in the House — those concerns haven’t surpassed the desire to pass tax reform fast.
