Legislation

After last-minute deals, the Senate narrowly passes Republican tax plan

Senate Republicans, after a flurry of last-minute deals, salvaged their tax plan early Saturday and put Congress on track to deliver President Trump’s most significant first-year accomplishment.

The ambitious package, opposed by Democrats as a giveaway to the wealthy that will pile on the national debt, challenges GOP orthodoxy against deficit spending. Even after accounting for future economic growth, the plan is estimated to add $1 trillion to the deficit over 10 years, despite Republican promises that the tax cuts will pay for themselves.

Still, all but one Republican voted to approve the bill. Sen. Bob Corker of Tennessee, one of the GOP’s few remaining deficit hawks, joined all Democrats in opposing the plan in a 51-49 vote. The bill must now be reconciled with a House-passed version, a process that leaders hope to complete as early as next week.

Corker, who is retiring at the end of his term, voted no after he was unable to convince colleagues to install a mechanism to claw back some tax breaks in the future if they worsened the deficit.

It is likely that the Senate and House versions will be swiftly reconciled in a conference committee, though it is also possible that the House may opt to simply approve what the Senate passed.

Unlike the collapse of GOP efforts to repeal Obamacare, Republicans in Congress appear determined to stick together and not let their differences interfere with their goal of passing tax cuts by year-end.

Republicans are hungry for a legislative accomplishment with control of Congress and the White House, especially before they face 2018 midterm voters and deep-pocketed donors, who have grown impatient with other stumbles, particularly on healthcare.

Groups backed by the wealthy Koch brothers, in particular, have been a constant presence at the Capitol, pushing the tax bill forward.

The rushed process, conducted largely behind closed doors, drew criticism from Democrats and others for foregoing the usual hearings and debate expected for such a major legislative undertaking.

“This is not the way to do business in the U.S. Senate,” said Sen. Jeff Merkley (D-Ore.) during the floor debate. “This is the way to do business in the swamp.”

After receiving the revised text hours before the vote, Democrats started tweeting pictures and videos of the inches-thick bill, complaining about the scribbled changes in the margins.

Democrats criticized one revision from Sen. Pat Toomey (R-Pa.) that would have specifically exempted Hillsdale College in Michigan from a new 1.4% excise tax on university endowment investment income. Among the school’s graduates is Blackwater founder Erik Prince, the brother of Trump’s Education Secretary Betsy DeVos, and other alumni now in the Trump administration.

The change was quickly revised to exclude Hillsdale from special treatment. But the provision was struck from the final bill by an amendment sponsored by Democrats.

By midnight, Pence arrived at the Capitol to cast the tie-breaking vote on an amendment from Sen. Ted Cruz (R-Texas) and championed by social conservatives to expand tax-deferred 529 college savings accounts to K-12 private school tuition and home-school expenses. The House bill goes a step further expanding the accounts for unborn children.

Overall, the House and Senate bills would be the most massive rewrite of the tax code in a generation, centered on the reduction of the 35% corporate rate to 20%, its lowest level since the Great Depression.

The bills lower individual rates — the Senate drops the top 39.6% rate to 38.5%, the House lowers it to 35%, other differences that will need to be resolved.

But both bills also do away with many popular deductions used by Americans to reduce their tax bills, including the personal exemption.

Instead, the bills offer an enhanced standard deduction, at $24,000 for couples, and a more generous $2,000 child tax credit in the Senate version.

While taxpayers across income levels are expected to see cuts on average at first, the benefits are uneven and some households, nearly 1 in 10, would see a tax hike, according to the Tax Policy Center.

Nonpartisan analyses show tax benefits flow mainly to the wealthy with reductions of $34,000 a year for the top 1% while lower-income households see $50 tax breaks.

And while the corporate cuts are permanent, the individual rates — under the Senate version — expire in 2025, meaning most middle-income taxpayers would face tax hikes in eight years.

The late decision to maintain the AMT will particularly hit middle- and upper-income households that have become increasingly exposed to the tax, which was initially designed to tax the wealthiest filers.

One of those taxpayers was Trump. According to a leaked portion of this 2005 federal tax return, Trump paid $31.2 million in alternative minimum tax. That accounted for the bulk of the $36.6 million he paid in federal income taxes that year.

For years, Republicans railed against rising deficits under then-President Obama. But the report Thursday from the nonpartisan congressional Joint Committee on Taxation said only about $408 billion would be raised through growth created by the tax cuts, leaving a $1-trillion shortfall.

Corker, the powerful chairman of the Foreign Relations Committee, had pushed for a trigger mechanism to reverse some tax cuts if deficits rise, but it was not allowed under Senate rules.

Once leaders secured votes from other holdouts Friday, they appeared ready to push forward with the vote, with or without him.

lisa.mascaro@latimes.com

@LisaMascaro

jim.puzzanghera@latimes.com

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UPDATES:

10:50 p.m.: This article was updated after the final Senate vote.

3:55 p.m.: This article was updated with details about the latest version of the tax plan and Corker’s decision to vote no.

9:05 a.m.: This article was updated after the vote was delayed and McConnell announced that he had the votes needed for passage.

This article was originally published at 7:25 a.m.


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