The House of Representatives on Thursday took an important step toward delivering a key legislative priority, passing an overhaul of the tax code.
The celebration could prove short-lived, however, because of a familiar roadblock — the Senate.
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The House voted 227-205 to pass the Tax Cuts and Jobs Act. But even as Republicans in the House chamber were applauding, storm clouds were growing darker in the upper chamber. Sen. Ron Johnson (R-Wis.) took Washington by surprise this week by declaring that the Senate version of the bill does not do enough to cut taxes on small businesses that do not file as corporations.
“In the current form, I wouldn’t vote for it,” he told CNBC’s “Squawk Box” on Thursday before the House vote.
Sens. John McCain (R-Ariz.), Bob Corker (R-Tenn.), Susan Collins (R-Maine), and others have expressed concerns with various aspects of the bill but have stopped short of declaring themselves “no” votes. Collins told reporters this week that she would like to make the corporate tax cut smaller to make room for a more generous child tax credit and to apply the break even to Americans who do not earn enough money to pay income taxes.
What’s more, allegations of child sexual abuse against Alabama Republican Senate candidate Roy Moore has thrown into doubt the outcome of a December 12 special election. Losing the seat would narrow the GOP’s already-slim margin for error in the Senate.
But during the House debate over the Tax Cuts and Jobs Act, Republicans argued that cutting the top corporate tax rate from 35 percent to 20 percent would generate economic growth and create jobs.
“I want to make sure that the vote works for the job creators of America,” said Rep. Steve Chabot (R-Ohio), later adding, “Small businesses are getting killed by the current tax code.”
Republicans countered Democratic attacks on corporate tax cuts as a giveaway to the wealthy by arguing that lower business taxes would benefit workers and consumers.
“Business entities do not pay taxes — people do,” Rep. Jim Renacci (R-Ohio) said.
Democrats trained criticism on the reform part of the tax reform proposal, repeatedly calling it a “tax scam.” They focused on the elimination of deductions necessary to pay for reducing tax rates. The Republican bill would lower and reduce tax rates and nearly double the standard deduction, which they say would make the tax code simpler by reducing the number of people needing to itemize their tax returns.
But that means the elimination or reduction of popular deductions, such as provisions letting people write off the cost of state and local taxes, extraordinary medical expenses, and interest on student loans.
“This is nothing more than a hit job on middle America to pay for a massive tax cut for corporate America,” Rep. Brian Higgins (D-N.Y.) said. “The only certainty from this charade is slower economic growth, more income inequality, and exploding budget deficits.”
Senate Minority Whip Steny Hoyer (D-Md.) characterized the Republican plan as a cynical effort based in politics, not policy.
“Look to your souls, not your polls,” he said.
Rep. Bill Parcell (D-N.J.) said cutting taxes is irresponsible because it would add $30 billion on interest to the national debt every year.
“This is a terrible bill,” he said. “Unanimous consent here. The real price of this bill is hidden.”
Rep. Lloyd Doggett (D-Texas) alluded to the allegations against Roy Moore, tying in a provision in the bill that he said would aid companies shifting jobs abroad.
“While public attention is diverted to scandal in Alabama, Republicans are rushing through this sham of a bill developed in the dark of lobbyists before most Americans realized what’s about to hit them in the face,” he said.
House Ways and Means Committees Chairman Kevin Brady (R-Texas), the chief architect of the tax bill, argued that the legislation would lead to higher incomes, faster economic growth, and lower taxes for most Americans. He said it would modernize the outdated tax code and make U.S. businesses more competitive with the rest of the world.
Brady also alluded to complaints from some GOP colleagues that the tax cuts and reforms do not go far enough. He said passing the bill does not preclude Congress from making more improvements down the road. He called it a first step.
“But it’s not the final step,” he said. “We’re Republicans. We belief the tax code doesn’t belong to Washington. It belongs to the American people.”