But House Republicans moved the measure Friday, five weeks ahead of midterm elections that will decide control of Congress, in an effort to refocus attention on Trump’s top legislative accomplishment — as well as to put Democrats in the position of voting against giving permanent tax cuts to individuals at all income levels.
“This relief goes to middle-class families and low-income families working their way up,” said Rep. Kevin Brady (R-Tex.), chairman of the Ways and Means Committee, of Friday’s measure. “Who do you trust: Washington to spend your money, or you and your family?”
The bill passed 220 to 191. Passing the legislation was the final item on House Republicans’ agenda before adjourning to spend the next month campaigning for reelection.
Democrats termed the legislation another “tax scam” that primarily helps the wealthy while adding even more to the nation’s dangerously large $21 trillion debt. And Democrats warned repeatedly that the legislation would threaten Social Security and Medicare, claiming the GOP would ultimately seek to cut those programs to pay down the debt — a charge Republicans dismissed as scare tactics.
“I guess their giveaway to the ultrawealthy wasn’t enough the last time around, so they’ve come back for round two,” said Rep. Linda T. Sánchez (D-Calif.). “When the bill finally comes due, I’m terrified Republicans will pay for it by cutting Social Security and Medicare.”
But unlike the first tax law last year, when Democrats were unanimously opposed, this time three House Democrats joined the bulk of Republicans in voting “yes.”
Two of them — Jacky Rosen of Nevada and Kyrsten Sinema of Arizona — are running for Senate in tight races against Republican opponents who backed the original tax law.
Rosen and Sinema had both voted “no” on the first law and have come under attack from Republicans on the issue.
The “yes” votes they cast Friday could help them neutralize such attacks, a scenario that helps explain why Senate GOP leadership won’t put a new tax cut bill on the Senate floor. Vulnerable red-state Democrats could vote in favor of it, which would allow them to boast of backing Trump on tax cuts — yet the legislation still would not command enough support to pass the Senate.
“Last year’s tax bill failed to provide permanent tax relief for middle class families and small businesses,” Sinema said in a statement. “Today’s bill rectified that issue and that’s why I voted yes.”
The third Democratic “yes” vote Friday came from Rep. Conor Lamb, who won a special election upset in March to represent a heavily Republican district in southwestern Pennsylvania. Lamb was not in Congress when the initial tax legislation passed.
The tax bill that became law in January permanently cut the corporate tax rate from 35 percent to 21 percent. This corporate tax cut was accompanied by more modest rate reductions for individuals at all income levels, but those individual cuts are set to expire in 2025. The law also temporarily doubled the standard deduction claimed by most filers and temporarily doubled the Child Tax Credit to $2,000 per child.
The legislation passed Friday by the House would make the individual tax cuts permanent, and also lock in place the doubling of the standard deduction and of the Child Tax Credit.
The cuts were made temporary to limit the bill’s projected additions to the deficit, an effort to make the bill qualify for Senate procedural rules that allow some legislation to pass by a simple majority. Without using those rules, Republicans would have been unable to overcome Senate Democrats’ opposition to the measure.
At the time, Republicans said the individual tax cuts would be extended at a later date.
Since the tax legislation became law, it’s become increasingly unpopular with voters. In August, a Monmouth University poll found 37 percent of Americans approving and 45 percent disapproving of the law.
The new package would also make permanent the Republican tax law’s new $10,000 cap on how much taxpayers can deduct from their state and local taxes. That policy, intended to offset the enormous price tag of the original law, has been criticized by Republicans and Democrats in states like New York, New Jersey and California, where taxpayers are more likely to be affected by the cap because their states have high taxes.
For that reason, nine Republicans from New York and New Jersey and one from California joined Democrats in voting against Friday’s bill.
“It is wrong and irresponsible for the House Republican leadership to schedule a vote today on legislation to make permanent the cutting back of the State and Local Tax (SALT) Deduction,” said a statement Friday from New York Republican Reps. Peter T. King, Lee Zeldin and Dan Donovan. “This legislation unfairly targets our hardworking constituents while subsidizing most of the rest of the country.”
The GOP’s “tax reform 2.0” also contains several policies that primarily help richer taxpayers, including the extension of a large 20 percent deduction for owners of “pass through” entities — companies in which business income is “passed through” to an individual’s tax returns — and cuts to the estate tax paid by about 5,000 of the wealthiest families in America.
Since most of these new cuts would not begin until 2025, the package would only add an additional $631 billion to the deficit by 2028, according to the Tax Policy Center, a centrist think tank. But in the 10 years beyond that — from 2028 to 2038 — the tax law would cost an additional $3.15 trillion, TPC said.
TPC also found that the law would give a substantially bigger tax breaks to the richest families over those in the middle class. The richest 1 percent of filers would see an average tax cut of $40,000, while those in the middle 20 percent of earners would see an average cut of $980, TPC said.
Overall, that makes it slightly less regressive than the first round of GOP tax cuts, which included corporate tax cuts that primarily helped richer Americans, according to Joseph Rosenberg, a senior research associate at TPC.
House Republicans also passed a series of retirement-related tax provisions Thursday. The most significant is a new tax-free savings account that would encourage savings but would also disproportionately help those with the means to create these additional accounts, said Steve Rosenthal, a tax expert at TPC.
The GOP also passed a plan that would make it easier for small businesses to pool together to form a retirement plan as a group. The GOP plan would also allow students to treat stipend payments as compensation when contributing to IRA plans, and extend of 529 savings plans for home-school expenses.