Senate and House Face Off Over Tax Reform

After an embarrassing off-year election in New Jersey and Virginia last Tuesday, the Republican Party now faces the very real possibility that it could stumble on tax reform, perhaps sinking its majorities in the 2018 midterm elections.

The Senate Republicans announced on Thursday the latest iteration of the White House tax plan, hoping to delay the key cut in corporate taxes, by one year, to save $100 billion.

It sounds like a small change, but it could cause major party infighting, and could cause tension between the House and Senate. The House has its own plan, and that bill has some considerable differences.

A major proponent of tax reform says the Senate bill was to get the ball across the goal line, and GOP officials such as Senate Majority Leader Mitch McConnell (R-Ky.) likely took cues from the White House. If anything, the Senate bill makes a victory likely this year, not in 2018, said Grover Norquist, the president of Americans for Tax Reform and a longtime conservative tax-reform activist.

A tax reform fumble could be fatal for the GOP's hopes to pad or retain its majorities in the House and Senate next year.

"This means we get this done by Christmas," said Norquist in a call to LifeZette. "With all the constraints, and all the pressure, they are so close."

At first glance, it looks like some major work will need to be done. The House bill, known as the Tax Cuts and Jobs Act, shrinks the number of tax brackets to four: 38.5 percent, 35 percent, 25 percent, and 12 percent.

But the Senate bill keeps the same number of brackets, seven, as is the law now, switching the rates downward a bit. Those brackets are: 10 percent, 12 percent, 22.5 percent, 25 percent, 32.5 percent, 35 percent and 38.5 percent.

There are some things in the Senate bill that President Trump may like. The Senate bill aggressively deals with state and local tax deductions, getting rid of them. The deductions help subsidize high-tax states such as New York and California, according to the New York Post.

The House was concerned about the appeal of the local deductions. Its bill allows a deduction for property taxes.

Related: GOP Moves to Crack Down on Corporate Tax Dodgers

The Senate bill also slaps a 12.5 percent tax on any overseas filing for patents or intellectual property, seeking to return such activity to American shores.

And the Senate bill keeps the tax credit for adoption, something for which the House drew wrath when its bill eliminated it.

But the president and conservatives were hoping that a tax cut for corporations would cause some money parked overseas to come home in 2018. The Post reported that the Senate bill would instead allow companies to deduct all capital investments in 2018.

The Senate GOP's reasoning is that any tax cut could not add $1.5 trillion to the deficit over 10 years. If it stays within that goal, the bill cannot be filibustered by the Democratic minority. The House has no such restrictive legislative rules.

A tax reform fumble could be fatal for the GOP's hopes to pad or retain its majorities in the House and Senate next year.

While President Donald Trump and congressional leaders have recently boasted about all the bills Congress has passed, the fact remains that the GOP lacks a major legislative win on a big issue. The Senate failed to repeal the Affordable Care Act, aka Obamacare, last summer.

But Norquist says the House and Senate can work things out.

"You could sit down, and in two weeks, you could work out a compromise," he said.

(photo credit, homepage images: Mitch McConnell, CC BY 2.0, by Mark Taylor)

Last Modified: November 10, 2017, 8:14 am

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