The Senate is expected to release its framework for tax reform on Thursday, which differs in key ways from the House plan — but that’s not even its biggest problem.
Getting 50 Republican senators to vote for the final bill will be difficult, especially because there are dramatically divergent views on the bill’s goals.
One of the biggest obstacles is a fight over increasing the deficit. The House plan would do so by an estimated $1.5 trillion over the next 10 years. After Tuesday night’s trouncing in Virginia, Senate Finance Committee Chair Orrin Hatch told the Washington Post that the results of election night could make passing a tax plan more difficult.
We still don’t have details about the plan, but it’s expected to propose delaying the corporate tax cut until 2019, which would substantially lower the cost of the tax cut bill, according to the Washington Post. This is a sharp break both from the House and the White House, who is pushing for deep tax cuts for corporations.
The policy fight over tax reform currently shaping up in Congress is similar to the health care debate in many ways. Lawmakers have an extremely tight deadline and a lot of competing demands. And just like with health care, Senate Republicans have a slim margin of error — they can only afford to lose two votes.
Here are the competing Republican factions on taxes, so far:
The deficit hawks: Bob Corker, Jeff Flake, John McCain
Bob Corker (R–TN) and Jeff Flake (R–AZ) have made it very clear they don’t think a Republican tax bill should increase the national deficit in any way. Corker so far is the only Republican who has explicitly said he won’t support a bill that would add to the national deficit.
“With realistic growth projections, it cannot produce a deficit,” Corker told Bloomberg last month. “There is no way in hell I’m voting for it.”
Make no mistake; Corker wants to pass a tax bill. But he isn’t seeking reelection next year, so he’s unencumbered by political pressure to hold his nose and vote for something he doesn’t like. Flake is also not seeking reelection, and he’s been clear he doesn’t think tax reform should just be tax cuts. When the House bill was released, Flake took to the Senate floor criticizing steep tax cuts without real tax reform.
“We cannot simply rely on rosy economic assumptions, rosy growth rates to fill in the gap; we’ve got to make tough decisions,” Flake said. “We’ve been hearing a lot about cuts, cuts, cuts. If we are going to do cuts, cuts, cuts, we have got to do wholesale reform. With the national debt exceeding $20 trillion, we have got to do this seriously.”
Another person to watch is McCain, who voted against the Bush tax cuts in 2001 and 2003. McCain, who was reelected in 2016 and likely won’t run again due to his recent brain cancer diagnosis, is also still a stickler for regular order and wants a tax bill passed in a bipartisan way. If it’s not, he may pull the same tactic he did on Obamacare repeal: Vote it down.
The moderates: Susan Collins, Lisa Murkowski
Susan Collins (R–ME) and Lisa Murkowski (R-AK) are the two moderate senators whose votes helped doom Obamacare repeal. They’re expected to be friendlier to a tax bill, although both have said they want to see a final version before making up their minds. If history is any indication, Collins voted for the Bush tax cuts in the early 2000s.
The big thing to watch for with Murkowski and Collins is if Republican leadership tries to repeal the Obamacare individual mandate tax penalty in order to pay for other things they want in the bill. So far, Collins and Murkowski haven’t explicitly said how they’ll vote on a tax bill that includes the repeal of the individual mandate, but they clearly think it’s a bad idea that could mar the bill’s chance of passing.
“It complicates the efforts to get a tax reform package through the Senate,” Collins told reporters recently.
Murkowski agreed she doesn’t think the tax bill should be tied into health care issues, saying it “may be unnecessarily complicating things.”
Still, Republican leadership is trying to provide incentives for Murkowski and Collins to get on board with a tax bill. Not repealing the estate tax is seen as an incentive for Collins, while Murkowski is trying to work out a deal that could open up the Arctic National Wildlife Refuge in Alaska to oil and natural gas drilling as a way to add revenue to the tax bill.
Senators pushing for Obamacare’s individual mandate repeal: Ted Cruz, Tom Cotton and Rand Paul
On the other side of the individual mandate question, we have Sens. Ted Cruz (R–TX) and Tom Cotton (R-AR). The two conservative senators really want to use the tax bill as a chance to repeal the individual mandate tax penalty after the Senate killed its own attempt to repeal and replace Obamacare earlier this year.
Getting rid of the tax penalty could save $338 billion over the next 10 years, but it would also lead to 4 million more uninsured Americans by 2019 and 13 million by 2027, according to analysis by the Congressional Budget Office. As Vox’s Dylan Scott explains, getting rid of the mandate would money because it would mean fewer people would likely enrolled in Medicaid and Obamacare’s insurance marketplaces. And it would satisfy the demands of President Trump, who wants the Affordable Care Act dismantled one way or another.
In addition to wanting action on health care, Cruz has another demand for a tax bill; he’s not a fan of the House plan to repeal the state and local tax deduction, which would effectively raise taxes on people in high-tax states like New York, New Jersey and California. On Tuesday, Cruz called the provision unfair.
“There are some taxpayers who are losing exemptions, particularly in some high-tax states like New York or California that could conceivably be paying higher taxes,” he said at a press conference. “I think that is a mistake. I think tax reform needs to cut taxes for everybody.”
Even so, both Cruz and Cotton probably won’t buck party leadership on taxes, and will likely support the Senate plan.
Child Tax Credit: Marco Rubio, Mike Lee
Sens. Marco Rubio (R-FL) and Mike Lee (R-UT) have long been pushing for an increase in the child tax credit as a boost to the middle class and working families. Right now, parents can get a tax credit of up to $1,000 per child under the age of 17, according to the Urban-Brookings Tax Policy Center. But advocates were disappointed by the House plan which would only increase the child tax credit to $1,600. Rubio and Lee want to go further, raising it to $2,000.
“When you compare that to some of the tax cuts you’re going to see in other parts of this tax reform, I would say that’s not nearly enough,” Rubio said in a recent speech on the Senate floor. “It’s certainly not enough to make a difference.”
Especially given the fact that the House tax plan offers the biggest benefits to big businesses and corporations, and could ultimately raise taxes on middle-class earners, Rubio hasn’t been shy about saying the bill needs to offer something to the middle class, too. Increasing the Child Tax Credit is something conservative Republicans like Lee and Rubio and Democrats can agree on. Even though this provision may seem small, it could have huge implications for the tax bill’s chances.
Rand Paul: just being Rand Paul
If there’s a persistent thorn in the side of Senate leadership, it’s libertarian Rand Paul (R–KY), who is known for his penchant of opposing leadership proposals because he believes they don’t go far enough cutting taxes or federal spending. Paul has been clear he wants a tax cut for businesses and working families, but doesn’t think the math is there to do both.
“The danger for this bill right now is the pay-for may be a middle-class tax hike. And if that’s that, it’s going to be a real problem,” he told Politico in a recent interview. “If you lower the taxes on the rich and lower the taxes on the poor and then say, ‘Oh, it’s going to be revenue neutral,’ we’ve got to raise somebody’s taxes to pay for it.”
The Kentucky senator is also currently out of commission with six broken ribs, after he was attacked by a neighbor at his Bowling Green home earlier this week. The bizarre incident was attributed to a lawn dispute.
Paul has never been afraid of bucking party leadership or the will of President Trump, so he typically tightens Republicans’ margins of error on voting, making it more difficult for them to get to 52 votes.