Senate and House Face Off Over Tax Reform

(LifeZette) After an embarrassing off-year election in New Jersey and Virginia last Tuesday, the Republican Party now faces the very real possibility that it could stumble on tax reform, perhaps sinking its majorities in the 2018 midterm elections.

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Grover Norquist/Photo by Gage Skidmore (CC)

The Senate Republicans announced on Thursday the latest iteration of the White House tax plan, hoping to delay the key cut in corporate taxes, by one year, to save $100 billion.

It sounds like a small change, but it could cause major party infighting, and could cause tension between the House and Senate. The House has its own plan, and it has some considerable differences.

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A major proponent of tax reform says the Senate bill was to get the ball across the goal line, and GOP officials such as Senate Majority Leader Mitch McConnell (R-Ky.) likely took cues from the White House. If anything, the Senate bill makes a victory likely this year, not in 2018, said Grover Norquist, the president of Americans for Tax Reform and a longtime conservative tax-reform activist.

“This means we get this done by Christmas,” said Norquist in a call to LifeZette. “With all the constraints, and all the pressure, they are so close.”

At first glance, it looks like some major work will need to be done. The House bill, known as the Tax Cuts and Jobs Act, shrinks the number of tax brackets to four: 38.5 percent, 35 percent, 25 percent, and 12 percent.

But the Senate bill keeps the same number of brackets, seven, as is the law now, switching the rates downward a bit. Those brackets are: 10 percent, 12 percent, 22.5 percent, 25 percent, 32.5 percent, 35 percent and 38.5 percent.

There are some things in the Senate bill that President Trump may like. The Senate bill aggressively deals with state and local tax deductions, getting rid of them. The deductions help subsidize high-tax states such as New York and California, according to the New York Post.

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The House was concerned about the appeal of the local deductions. Its bill allows a deduction for property taxes.

The Senate bill also slaps a 12.5 percent tax on any overseas filing for patents or intellectual property, seeking to return such activity to American shores.

And the Senate bill keeps the tax credit for adoption, something the House drew wrath for when its bill eliminated it.

But the president and conservatives were hoping that a tax cut for corporations would cause some money parked overseas to come home in 2018. The Post reports that the Senate bill would instead allow companies to deduct all capital investments in 2018.

The Senate GOP’s reasoning is that any tax cut could not add $1.5 trillion to the deficit over 10 years. If it stays within that goal, the bill cannot be filibustered by the Democratic minority. The House has no such restrictive legislative rules.

A tax reform fumble could be fatal for the GOP’s hopes to pad or retain its majorities in the House and Senate next year.

While President Donald Trump and congressional leaders have recently boasted about all the bills the Congress has passed, the fact remains that the GOP lacks a major legislative win on a big issue. The Senate failed to repeal the Affordable Care Act, aka Obamacare, last summer.

But Norquist says the House and Senate can work things out.

“You could sit down, and in two weeks, you could work out a compromise,” said Norquist.

Republished with permission from LifeZette via iCopyright license.

  • Bob

    Subsidizing high tax states??????? Instead you are subsidizing wealthy by cutting out estate taxes. You are subsidizing corporations with huge tax cuts. What will they do with the extra money? Raise dividends? Buy back stock? It would be better to give greater tax cuts to middle class instead. They would have more income to spend and spur the economy.