House Republican leaders scrambled Wednesday to patch a $74 billion hole they had created in their own tax plan, leaving them with a painful choice between scaling back the bill’s benefits for individuals or reducing their proposed tax cuts for businesses.
The decision leaves lawmakers caught between nonpartisan estimates showing the bulk of the bill’s tax cuts would go to businesses and the very wealthy, and demands from powerful industries and their lobbying arms looking to protect or expand the breaks they’ve carved out in the House bill.
Rep. Kevin Brady (R-Tex.), chairman of the House Ways and Means Committee, said Wednesday evening that he would release a new set of revisions to the bill Thursday. He said the panel would “continue to weigh the scores” from nonpartisan congressional revenue estimators, working through the night to bring the bill under a $1.5 trillion limit on its cost.
The struggle to keep the House bill on track comes as Senate Republicans said they planned to release their own tax bill Thursday, regardless of whether the House panel finishes its work. That bill, which is expected to differ significantly from the House measure, could create a political quandary for House Republicans, faced with voting next week on a tax bill with scores of controversial provisions while another version sits across the Capitol that could be more palatable.
“It’s double jeopardy,” said Rep. Ken Buck (R-Colo.). “You get hit by all the people who don’t like the House bill, and then you get hit a second time by all the people who don’t like the Senate bill.”
In the House, the trade-offs took on new urgency after Congress’s nonpartisan tax accountant found that changes made to the bill since its introduction mean it would add $1.57 trillion to the deficit over a decade. That is $74 billion over the maximum amount of debt a GOP bill can add if Republicans want to take advantage of special rules to pass the bill through the Senate with 50 votes — a must given that Republicans hold only 52 Senate seats and Democrats have signaled broad opposition to the bill.
Republicans in both chambers will have to contend with the results of Tuesday’s elections, in which state and local Republicans were drubbed by Democrats.
Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) said the losses could complicate the tax push. “I mean, it could, because the elections went against the Republicans,” Hatch said Wednesday morning.
Asked whether he is feeling pressure to tilt the tax plan’s benefits more toward the middle class, Hatch said, “I think we’ve been moving that way anyway.”
Other top Republicans, including House Speaker Paul D. Ryan (Wis.), said the election results underscored the importance of the GOP delivering on promised changes to the tax code.
“It doesn’t change my reading of the current moment,” Ryan said of the elections during a morning event hosted by the Washington Examiner. “It just emphasizes my reading of the current moment, which is: We have a promise to keep, and we have to get on with keeping our promise.”
Rep. Richard E. Neal (Mass.), the top Democrat on the Ways and Means Committee, predicted “substantial change is coming” to the House bill based on Tuesday’s election results and a Senate bill that is expected to be markedly different.
“Something happened here today,” he said, pointing to long stretches Wednesday where Brady was absent from the committee dais, huddled with aides as lobbyists and business executives walked the halls of the Capitol seeking to influence the bill.
Aides and lobbyists familiar with the behind-the-scenes discussions over the bill said GOP tax writers are under pressure to expand eligibility for a new 25 percent business tax rate and rewrite provisions affecting life insurers. One prominent tax lobbyist, Ken Kies, was spotted leading a phalanx of two dozen life insurance executives into the Capitol on Wednesday.
Neal predicted that Republicans would, for political reasons, also move to restore itemized deductions for medical expenses and student loan interest.
Changes made to the House bill since it was released last week have largely benefited corporations at the expense of individuals.
While a change on Monday restored a $3.2 billion middle-class provision allowing those enrolled in employer-sponsored dependent-care savings plans to deduct up to $5,000 from their taxes, a revision on Friday rolled back individual tax cuts by nearly $82 billion by indexing individual tax parameters to a different measure of inflation that tends to grow more slowly.
Another amendment adopted Monday mostly reversed a 20 percent excise tax levied on certain transactions between subsidiaries of multinational corporations — largely creating the $74 billion hole. The tax, intended to prevent companies from shifting profits to lower-tax overseas affiliates, had generated strong resistance from powerful business interests.
Republicans say that the business tax cuts will drive economic growth, adding jobs and pushing up wages, thus creating benefits for Americans at large. But they have had to battle analyses showing that middle-class taxpayers would reap only a fraction of the bill’s direct benefits and that some of those taxpayers — such as those claiming the deduction for medical expenses — would actually face a tax increase.
And although GOP leaders say that the bill will mostly pay for itself by increasing growth, that is based on speculative analyses that congressional scorekeepers have not endorsed.
Democrats have continually pounded the bill as a giveaway to the wealthy, and on Wednesday they pounced on the election results to warn of a middle-class backlash that would grow if Republicans continued their tax push.
“It should be a giant stop sign for the tax bill,” Senate Minority Leader Charles E. Schumer (D-N.Y.) told reporters. “Want to pass this tax bill? Want to hurt the suburbs? Make our day.”
Some Senate Democrats, buoyed by Tuesday’s election results, again urged Republicans to let them join the negotiations in a bid to ensure easier passage of legislation.
“What are they afraid of? They have the majority,” Sen. Tim Kaine (D-Va.) told reporters. “It’s not like we can buffalo amendments through unless we can convince them it’s a good idea. It would be easier to get 60 votes in a true bipartisan process, and the product would be better — and because it’s not reconciliation you could do it permanent. And it would be bipartisan. It would be easier to do that and not jam it through.”
Kaine’s comments came the day after White House officials huddled with about a dozen moderate Democrats in a bid to make the legislation a bipartisan document. President Trump phoned in to the meeting from Seoul in a bid to win over the Democrats, and acknowledge that he has consulted his own accountant about the potential changes in his own taxes.
House Republicans face a major challenge in finding hundreds of billions of dollars in offsetting revenue to make changes to the bill without violating a framework negotiated between GOP leaders from the Senate and White House.
There is one simple but controversial option: use the bill to repeal the Affordable Care Act’s individual mandate. That change would save the government $338 billion over 10 years, according to an analysis published Wednesday by the nonpartisan Congressional Budget Office, but it would also decrease the number of people with health insurance by 4 million in 2019 and by 13 million by 2027.
That change, which Trump has pushed personally, would add to the degree of difficulty of passing the bill through the Senate. Multiple attempts to repeal the ACA stumbled in the Senate, as Republican moderates balked at the scaling back of health benefits while the caucus’s most conservative members complained it left too much in place.
Efforts to win over moderates on ACA repeal gained an additional complication Tuesday when 59 percent of voters in Maine, the home state of key Senate swing vote Susan Collins (R), voted to expand access to Medicaid under the act.
Damian Paletta and Heather Long contributed to this report.