• Though Republicans sound optimistic, party leaders still do not have firm commitments from enough senators to ensure the bill will pass.
• Areas of contention include whether to add a trigger to offset the deficit impact and how low to make the corporate tax rate.
Senate tax cut will increase federal deficit by $1 trillion over decade
The congressional Joint Committee on Taxation said Wednesday afternoon that the Senate tax bill would add $1 trillion to federal budget deficits over the next decade, even after accounting for additional economic growth, a major blow to Republicans’ contention that the $1.5 trillion tax cuts in the bill will pay for themselves through growth.
The committee, which serves as the scorekeeper for growth and revenue estimates in tax bills, estimated that the Senate bill would boost economic growth by 0.8 percent over a decade. Republicans have said they expect substantially stronger growth than that to result from the tax cuts.
Throughout the tax debate over the last month, Republican leaders have frequently cited other analyses by the committee in order to make their case for the bill.
The committee said economic growth generated by the tax cut will offset losses by about $458 billion over the next decade. Over that same period, an additional $51 billion will be needed to pay interest on the additional debt the government will borrow to pay for the tax cuts.
“Overall, the budgetary effects of changes in economic growth are projected to reduce the deficit by $407 billion during the budget window,” the committee said.
Senate leadership throwing cold water on J.C.T. estimate
A spokeswoman for Senator Orrin G. Hatch, the Utah Republican who chairs the finance committee, said the joint committee’s analysis understates the actual economic growth and is not based on the current version of the bill.
“An analysis of tax provisions that do not reflect the final outcome of the evolving Senate tax bill – which will be amended on the floor this week – is incomplete,” said Julia Lawless, a spokeswoman for the Senate Finance Committee. “The nonpartisan Congressional Budget Office (CBO) has said it was ‘not practicable’ to issue a macro view of the Senate bill at this time. And given that leading economists have projected the Senate tax bill will deliver significantly higher amounts of economic growth and federal revenue than the Joint Committee on Taxation (JCT) reports, the findings of JCT are curious and deserve further scrutiny.”
Democrats wasted no time in seizing on the analysis
Senator Ron Wyden of Oregon, the top Democrat on the Finance Committee, said the analysis “ends the fantasy about magical growth and claims that tax cuts pay for themselves.”
“What it proves is that this bill offers very little other than a holiday bonanza to multinational corporations and special interests,” he said.
John McCain says he will vote yes.
Senator John McCain, the Republican from Arizona who was the deciding vote against repealing the Affordable Care Act, said on Thursday that he will vote in favor of the Senate tax cut 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,” Mr. McCain said in a statement.
Mr. McCain was seen as a wild card because of his willingness to buck his party’s leadership in the health care vote earlier this year. He also voted against big Republican tax cut packages in 2001 and 2003.
Some Republicans were worried that Mr. McCain could vote against the bill because of his sour relationship with President Trump. But Mr. McCain said that he was satisfied that the tax overhaul went through “regular order” in the Senate, with sufficient public hearings and opportunities for amendments.
While he said he remained concerned about the deficit and acknowledged that the tax bill is not perfect, Mr. McCain said that on balance it would be good for the country. “It’s clear this bill’s net effect on our economy would be positive,” Mr. McCain said.
Senator Kennedy is ready to saddle up and vote.
“I’m ready to vote,” said Senator John Kennedy, Republican of Louisiana. “It is time for us to saddle up and ride and go vote.”
Senator Collins is still undecided.
Senator Susan Collins remains a key senator to watch, given she has yet to commit to the bill and could be the deciding vote between a tax bill that passes and one that fails. On Thursday, Ms. Collins outlined some of her priorities and concerns at a breakfast sponsored by the Christian Science Monitor.
On her vote:
Ms. Collins said she remains concerned about the impact of the Senate plan to repeal the Affordable Care Act mandate that most Americans buy insurance or pay a penalty and also wants to ensure that taxpayers can continue to deduct some state and local taxes, a provision known as SALT.
“The SALT amendment is extremely important to me. The health care agreement is extremely important for me. It would be very difficult for me to support the bill if I do not prevail on those two issues,” she said.
Ms. Collins said that as of Thursday morning she was optimistic about the measures after conversations with President Trump and Senate leaders.
Still, “I am not committed to vote for this bill because who knows what is going to happen on the Senate floor.”
On the trigger:
“I want to see what the trigger is looking like. It’s gone through several iterations and it’s still under negotiation.”
Ms. Collins said she had concerns that if economic growth does not meet expectations, the trigger would be a gut punch to the economy at precisely the moment programs like Medicaid and unemployment compensation are most needed.
“You don’t want to raise taxes if the economy is going into a recession. That’s the worst thing you could do.”
On the corporate tax rate:
Ms. Collins said she was open to nudging the corporate tax rate above the 20 percent currently envisioned in the Senate bill.
“I don’t think we need to go to 20 percent on the corporate tax side,” she said. Senators have begun discussions about raising the rate to 22 percent, which would still be a bit cut from the current 35 percent corporate tax rate.
On automatic spending cuts that could be required by tax bill:
“I strongly oppose that. I have written a letter to Mitch McConnell asking what is the plan to avert that. I met with Senator McConnell just yesterday and he has assured me that will not be allowed to happen.”
Ms. Collins said she expected that a waiver of the so-called Paygo requirements would be included in a year-end spending bill.
On an amendment that would close the carried interest loophole:
“I would make refundable the tax credit for child or adult dependent care. I would pay for it by closing the loophole on carried interest.”
The Senate version of the bill would not end the loophole but would simply extend the minimum holding period for investments that qualify for the tax break to three years from one.
Conservative groups warn against raising corporate tax rate.
The politically powerful Koch network warned Republican senators on Thursday not to adopt a last-minute change to their tax bill that help low-income parents in exchange for a slightly smaller cut in the corporate tax rate.
Senators Marco Rubio of Florida and Mike Lee of Utah have filed an amendment to the bill that would allow low-income workers to use an expanded child tax credit to offset payroll taxes, not just income taxes; the distinction matters for families that do not currently face income tax liability. The senators propose paying for the move by reducing the corporate rate to 22 percent instead of 20 percent from the current 35 percent rate.
In a letter on Thursday, several groups in the conservative Koch network said the change would amount to “undermining” the economic growth goals of the bill. “Business tax relief is central to the goals of creating jobs and promoting economic growth,” the groups wrote, “and we are concerned that any effort to hold the corporate tax rate above 20 percent will substantially limit our ability to achieve those goals and expand opportunities for all Americans.”
And Representative Kevin Brady also wants to keep 20 percent corporate tax rate.
Mr. Brady, Republican of Texas and the chairman of the Ways and Means Committee, said he did not believe there was any willingness on the House side to increase the corporate rate above 20 percent.
“I think we believe that is a rate that makes us, America, much more competitive, and we know from studies that had we had that rate, we’d have many more jobs and businesses and facilities here in the U.S.,” he said. “So we continue to stay focused on the 20 percent.”
Just a reminder that if the Senate passes its tax bill, it will need to reconcile the differences with the House version before a final bill can be sent to Mr. Trump.
The tax cuts may not pay for themselves, even with 4 percent growth
Congressional Republicans and the Trump administration have yet to produce an analysis supporting their claims that the $1.5 trillion tax cut would not add to federal budget deficits.
Instead, they cite a ballpark estimate of the additional economic growth the tax plan will unleash, which, they say, should be enough to make the cuts pay for themselves. That estimate is an increase in gross domestic product of 4 percent over a decade, or 0.4 percent a year. “We’re confident that the $1.5 trillion gap would be filled by 0.4 percent growth,” Mr. McConnell said earlier this month. Other senators have echoed him.
A prominent conservative tax analyst says the actual growth needed to offset the tax cuts is significantly higher.
Kent Smetters, a former economic adviser in President George W. Bush’s administration, who is now the faculty director of the Penn Wharton Budget Model at the University of Pennsylvania, calculates that the actual growth needed to offset the cut would be 0.57 percent a year, or 5.7 percent over a decade, under a conventional method of scoring tax plans (the so-called current policy baseline).
He explained in an email: “The 0.4 percent value was calculated using the current tax system, which has a larger tax base than the new tax system after the cut. Instead, to figure out how much growth is needed for the tax cut to pay for itself, you need to start with the new tax base and ask how much must it grow to avoid any additional deficit.”
Put another way: If you’re cutting taxes, you won’t raise as much revenue compared to how much you would have raised under the old system.
It’s not the only problem Smetters sees with Republicans’ insistence that 0.4 percent is the right number to finance a tax cut, and an achievable one. He says the debt incurred by the tax cut will dampen growth from the cut. That’s consistent with the findings of the Penn-Wharton model, which projects the Senate tax bill would increase growth by only 0.03 to 0.08 percent a year, due largely to the drag from increased debt.
The trigger is triggering a headache
The so-called trigger is turning out to be a major complication as Senate Republicans try to finalize the details of their tax overhaul.
The idea, to address concerns of senators worried about adding to the deficit, is to put in place a mechanism that would raise taxes if projected economic growth falls short.
But Republicans are still working on how the trigger would function, and then there is the question of whether it would comply with the parliamentary rules that restrict what can be included in the tax bill.
On Thursday afternoon, there was little clarity on what might happen with the trigger, which conservative groups and some Republican lawmakers have already criticized.
“I think the trigger idea is idiotic,” said Representative Trent Franks, Republican of Arizona.
Mr. Franks said such a provision would make it impossible for businesses to be able to “predict the economic environment.”
“If you had a gun at your head everywhere you go,” he said, “it’s going to probably cause you not to be able to concentrate as well.”
Republicans promoted the virtues of their tax plan.
The Senate cleared a procedural hurdle on Wednesday with its vote to begin debating the tax bill, and early remarks from lawmakers offered a preview of what that debate will probably center on.
“This is an historic day as the Senate begins consideration of tax reform that will help boost America’s economy, that will create more jobs and that will leave more money in people’s paychecks,” said Senator Michael B. Enzi, Republican of Wyoming and the chairman of the Budget Committee.
Mr. Enzi offered a warning about the coming debate.
“You’re probably going to hear a lot of screaming going on in speeches this week,” he said. “Please don’t confuse volume with veracity or truth.”
But Democrats had a very different take.
Mr. Wyden offered another kind of warning.
“The Senate is 20 hours of debate away from a broken promise of truly historic proportions,” he said on Wednesday. This year, he said, was supposed to be when “the working people of America regained a powerful voice in Washington.”
“Instead of a strong voice, what they got instead was a big con job,” Mr. Wyden said. “If this Republican tax bill passes, Washington is going to reach into the pockets of working Americans and cut a big check to multinational corporations, to tax cheats and to the politically powerful and well-connected.”
McConnell optimistic ahead of vote.
On Thursday morning, Senator Mitch McConnell of Kentucky, the majority leader, expressed optimism about passing the tax overhaul.
“We’re on the cusp of a great victory for the country,” he said, adding that Senate Republicans were “headed toward the finish line either late tonight or early tomorrow.”
Schumer urges Republicans to work with Democrats.
Senator Chuck Schumer of New York, the Democratic leader, criticized Republicans for how they had undertaken the tax overhaul, complaining that they had shut out Democrats as they put together their bill.
Mr. Schumer said the Republican tax bill had made “a mockery of the legislative process,” and he pleaded for Republicans to work with Democrats on taxes instead of moving forward with the current tax plan.
“If my Republican friends close the door on their partisan tax bill tonight,” he said, “they will find an open door for bipartisan tax reform tomorrow.”
The president is not happy with The New York Times.
President Trump criticized The New York Times on Thursday in a pair of early morning Twitter posts about its coverage of the Republican’s tax plan.
“The Failing @nytimes, the pipe organ for the Democrat Party, has become a virtual lobbyist for them with regard to our massive Tax Cut Bill,” Mr. Trump wrote in one of his posts. An editorial criticizing the Senate tax bill was published Wednesday online and in Thursday’s print editions. The Editorial Board, which writes editorials, is separate from the newsroom.
The president also accused the news organization of violating its own social media guidelines after the NYT Opinion account shared on Twitter the phone numbers for two Republican senators’ offices. However, as one senior Times editor posted in a tweet, “The president is mistaken.” The guidelines, designed to avoid bias in social media posts, do not apply to the Opinion department’s posts.
“I was a co-author of the expanded social media guidelines. They apply to the NYT newsroom, not to NYT Opinion,” Cliff Levy, a newsroom deputy managing editor, tweeted in response to the president’s post.
The Times echoed that in its own Twitter post.
Mr. Trump himself received criticism for publicly sharing a phone number. He once gave out the cellphone number of Senator Lindsey Graham, Republican of South Carolina, during the 2016 presidential campaign.
The White House says the president will sign the tax bill.
The administration pledged official support on Thursday for the tax bill pending in the Senate, an unsurprising move that confirmed Mr. Trump’s promise to a Missouri crowd on Wednesday that he would sign the bill if it reached his desk.
“The Administration strongly supports Senate passage” of the bill, officials wrote in a statement of administrative policy, because it would reduce taxes for businesses and middle class families and simplify the tax code. The statement also praised provisions in the bill to repeal the individual health insurance mandate under the Affordable Care Act and to open part of the Arctic National Wildlife Refuge for oil drilling.
If the bill were presented to Mr. Trump, the statement said, “his advisers would recommend that he sign the bill into law.”
Here’s what comes next.
The complaints from Mr. Wyden and other Democrats carry limited weight because Republicans can — and plan to — pass their bill without any Democratic votes.
Republicans are using special procedures that shield the measure from a Democratic filibuster. Debate on the legislation is limited to 20 hours. When the debate ends, it will be time for a vote-a-rama, a marathon of amendment votes. Eventually, the Senate would vote to pass the tax bill.
But before then, the contents of that bill are expected to change.
Republicans have been discussing significant revisions to their bill as party leaders try to secure the votes they need for passage. Those discussions will continue on Thursday as the debate plays out on the Senate floor.
Source Article from https://www.nytimes.com/2017/11/30/us/politics/tax-overhaul-senate-debate.html