After a rough night of seemingly deadlocked negotiations, Senate Republicans return to the Capitol building Friday morning with the momentum to pass their tax bill.
And it appears they got there by abandoning a longstanding Republican concern about the national debt.
Late Thursday night, four senators were threatening to vote against the tax bill. Two, Sens. Steve Daines (MT) and Ron Johnson (WI), were calling for more tax breaks for “pass-through” businesses, companies organized as sole proprietorships, partnerships, LLCs, or S corporations that don’t pay the corporate income tax; and two, Sens. Jeff Flake (AZ) and Bob Corker (TN), had expressed deep concerns about the bill’s impact on the deficit.
But by early Friday morning, Daines said his concerns were addressed. He was told the tax bill would increase the deduction for pass-throughs from 17.4 percent to 23 percent. And he added, that he thought this bill would pass without Corker’s vote. Majority Whip Sen. John Cornyn (R-TX) said they had 50 votes, enough to pass the bill.
For days Corker has been trying to negotiate some kind of deficit fix. The latest iteration of the debate was a proposal to additionally tax corporations, or add back the alternative minimum tax on high-income individuals or corporations.
“That’s going nowhere,” Daines told Bloomberg. “What Bob was suggesting is just causing more problems.”
There’s no question that the Republican tax bill faces a major deficit question. On its face, the proposal, which gives corporations a massive tax cut, will increase the deficit by $1.4 trillion in 10 years — or, when adjusted for economic growth, by $1 trillion, according to the Joint Committee on Taxation.
But unlike Corker and Flake, Republicans are ignoring those numbers in order to pass their tax bill. And it seems they might have enough support to get there.
Republicans are ignoring their deficit problem
The tax cut bill Republicans are pushing through the Senate lives and dies by a complicated budget rule known as the Byrd Rule, a condition of the “reconciliation” process that allows Republicans to pass legislation with only 51 votes in the Senate. Because of how they set it up, Republicans’ tax bill can only increase the deficit by $1.5 trillion in the first 10 years, and can’t increase the national debt outside that window.
Technically, the Senate bill does this.
In addition to trying to repeal or cap various deductions — some big, some small — to offset the costs of massive corporate tax cuts, Senate Republicans, aware of the dilemma, devised a budgetary gimmick to ensure the tax bill passes Senate rules: They sunset almost all the individual tax relief to prevent a deficit increase outside the 10-year window.
Most Republicans senators are under the expectation that these tax cuts will be renewed and extended in 2025, but on paper the bill does not increase the deficit past the 10-year window, for now.
Senate Republicans have spent a lot of energy trying to make their deficit problem go away in recent weeks. This final round of negotiations in the Senate proves they are willing to look the other way.
Of course, there are two other votes that remain uncertain. One is another deficit hawk, Sen. James Lankford (R-OK), who has expressed concerns that the tax bill doesn’t responsibly address the national debt. He was working with Corker to devise some kind of backstop — and as of yesterday seems optimistic it would come together.
Asked whether he needed to a deficit fix to vote for the tax bill, Lankford would only say he was optimistic that a fix would come.
The other uncertain vote is Sen. Susan Collins (R-ME), the moderate senator who has called for a partial return of the state and local property tax deduction, which the Senate tax bill currently repeals, and assurances that two Obamacare stabilization bills will be passed in tandem with the tax bill’s repeal of the individual mandate. Collins, however, has sounded exceedingly optimistic that her concerns will be addressed.