The projection from the nonpartisan Joint Committee on Taxation contradicts Republicans’ claims that the overhaul of the tax code would pay for itself.
WASHINGTON — The Republican plan for a massive tax overhaul steamed toward Senate passage on Thursday, even as a nonpartisan congressional scorekeeper said the plan would fall short of Republicans’ claims that it would pay for itself.
A Joint Committee on Taxation analysis released Thursday afternoon, after senators had already taken initial votes on the bill, concluded that the bill would add $1 trillion to the national deficit over a 10-year period, even after the economic growth the bill is projected to create is taken into account.
The Republican bill would raise the gross domestic product by a yearly average of 0.8 percent during the next decade, but the federal revenue generated by that growth would offset only a fraction of the plan’s cost, the analysts found.
Still, Republicans appeared well on track to passing the bill, after picking up support from Sen. John McCain, R-Ariz., on Thursday morning, narrowing the number of holdouts.
A few issues remained unresolved, most critically a “trigger” sought by Sen. Bob Corker, R-Tenn., to raise taxes if growth estimates aren’t met. But Republican leaders projected optimism about passing the $1.5 trillion legislation through the Senate on Thursday evening or Friday, a major step forward as President Trump and Republican leaders seek to overhaul the U. S. tax code for the first time in three decades.
“This is not a perfect bill,” McCain said in a statement, “but it is one that would deliver much-needed reform to our tax code, grow the economy, and help Americans keep more of their hard-earned money.”
McCain’s stance on the legislation had been uncertain, and leadership had eyed him warily after he unexpectedly sank their efforts to repeal the Affordable Care Act over the summer with a theatrical thumbs-down on the Senate floor.
Republican leaders have little margin for error in the closely divided Senate, where just three defections can sink the bill, as Democrats unanimously oppose it.
Sen. Ron Wyden, D-Ore., the top Democrat on the tax-writing Senate Finance Committee, said the late-breaking analysis of the bill’s economic effects – which Republicans have been touting for months – illustrates a mistaken approach.
“This isn’t tax reform at all,” he said. “This is now just a grab bag full of goodies for multinationals and donors and special interests.”
Republican leaders, though, have brushed off the criticism for weeks. Senate Majority Leader Mitch McConnell, R-Ky., told reporters Thursday, “We’re certainly optimistic. As you know we had everybody on board to take the bill up. I think everyone is trying to get to yes.”
In a sign that Republicans expect the Senate to clear the bill this week, House Majority Leader Kevin McCarthy, R-Calif., on Thursday told lawmakers in that chamber to return to Washington a day earlier than scheduled next week to cast votes on Monday night to begin the process of resolving differences between the House and Senate bills.
“I strongly encourage all members to be here, present and voting,” McCarthy said on the House floor.
Of the 52 Republican senators, there were just a handful whose stances remained uncertain or undeclared as of early afternoon Thursday, most prominently Sens. Susan Collins of Maine, Ron Johnson of Wisconsin, Jeff Flake of Arizona and Corker.
Corker was holding out for resolution on his trigger proposal, which was encountering procedural difficulties under the complex rules Senate Republicans are using to consider the legislation on the floor. The rules allow them to pass the bill with a simple majority vote, instead of the 60 usually required, but also limit what kind of provisions may be considered.
In one version, the trigger would raise taxes by as much as $350 billion if the economy doesn’t grow by more than 0.4 percent yearly above a baseline established by the Congressional Budget Office.
On Thursday morning, Corker said the pending release of the new analysis – known as a “dynamic score” – could affect the negotiations over the trigger. But he insisted he could not accept a $1 trillion addition to the budget deficit.
“To the extent that dynamic scoring is less than that, that’s the gap that needs to be made up,” he said.
Senators are still debating where the money would come from for that change, as well as other changes other Republicans are seeking. Sen. Marco Rubio, R-Fla., was trying to increase a child tax credit. To do so, he would slightly decrease the size of the tax cut the bill proposes to offer corporations. Under the current version of the bill, that rate would drop from 35 percent to 20 percent.
House conservatives were drawing a hard line on that issue. “We have consistently said as low as possible but no higher than 20 percent,” said Rep. Mark Meadows of North Carolina, chairman of the House Freedom Caucus, referring to the corporate tax rate.
Collins was working on several issues, including partially restoring the ability of taxpayers to deduct state and local taxes from their federal tax bill. Flake said he was waiting for a few answers.
Johnson still has not said whether changes made by leadership were enough to satisfy his concerns about the treatment of so-called pass-through businesses, whose owners pay taxes through the individual code rather than at corporate rates. Johnson retains partial ownership of one such business and wants better treatment for them.
Overall, the legislation represents a massive change for the tax code that delivers huge cuts for corporate America and the wealthy, while the benefits for individuals are mixed or in some cases nonexistent, according to multiple nonpartisan analyses.
The Senate tax bill would slash the corporate tax rate from 35 percent to 20 percent, starting in 2019. It would also create incentives for multinational companies to bring foreign earnings back to the United States. And it encourages businesses to invest more, allowing them to immediately expense the cost of things like new equipment and machinery.
The bill would temporarily cut taxes on families and individuals, lowering tax rates and expanding the amount of income that isn’t subject to taxation. It would also, temporarily, expand the child tax credit for families earning less than $1 million. But it would also cut back on many tax breaks, prohibiting people from deducting the taxes they pay to states and localities.
Importantly, the bill would also repeal a central element of the Affordable Care Act, which creates penalties for Americans who don’t have health insurance coverage.
