© Bloomberg. Internal Revenue Code books sit during a House Ways and Means Committee markup hearing in Washington, D.C., U.S., on Monday, Nov. 6, 2017. The House tax-writing committee began debate on the GOP’s proposed overhaul, kicking off four frantic days for lobbyists and lawmakers to revise a bill that represents President Donald Trump’s final hope for a signature legislative achievement this year.
(Bloomberg) — The House tax-writing committee entered its third day of work Wednesday to hammer out the details of the Republican tax cut plan. Here are the latest developments, updated throughout the day:
Senate GOP to Present Bill to Members First (2:10 p.m.)
Senate tax writers plan to release their bill on Thursday, according to Senator John Cornyn, the No. 2 Republican leader. Cornyn said the plan was to walk through the bill with the GOP conference at 11.30 a.m. “It will be out there,” Cornyn said. “There are no secrets around here.” — Ari Natter
White House Continuing to Work on SALT: Mnuchin (1:40 p.m.)
Treasury Secretary Steven Mnuchin signaled the White House is continuing to work with lawmakers on crafting a compromise on the treatment of state and local tax deductions.
“Fundamentally, we agree with the idea of getting the federal government out of the business of subsidizing the states,” Mnuchin said in an interview Wednesday with Bloomberg TV in Washington. “Having said that, several of these states are a very big part of the economy — New York, New Jersey, Connecticut, California — and we’re sensitive to the impact on those states. I think that’s something we’ll continue to work with the House and Senate and look for the right solution.”
The House tax bill released last week calls for the repeal of state and local income and sales tax deductions, while preserving property tax deductions up to $10,000. GOP House members in high-tax states, including New York and New Jersey, have expressed concern that repealing the break entirely would subject some people in their districts to higher taxes.
Senate Republicans are considering fully repealing individual federal tax deductions for state and local taxes — including property taxes, according to two people familiar with their discussions. The people asked not to be named because the Senate’s tax-writing discussions haven’t been made public.
Mnuchin also said he isn’t ruling out delaying the start of a corporate tax rate cut, but emphasized that the administration’s “strong preference” is for the relief to start in 2018.
“The longer we wait, the worse it is for the economy and making companies competitive,” Mnuchin said during the interview. “The president’s strong preference — he feels very strongly that he wants to start this right away. But having said that, we’ll have to look at the entire Senate package.”
The Washington Post reported late Tuesday that Senate tax writers were considering a 1-year delay in implementing a 20 percent corporate rate. The House tax legislation unveiled last week calls for an immediate and permanent 20 percent corporate rate. Before the bill was released, House tax writers were said to have been considering a gradual phase in of the rate to ensure their plan would comply with congressional budget rules. — Saleha Mohsin and Michael McKee
Obamacare Mandate Repeal Gains Traction, Again (11 a.m.)
The impact of House Ways and Means Chairman Kevin Brady’s amendment to revise one of the GOP tax bill’s offshore provisions emerged late Tuesday — an estimated $74 billion revenue hole, which is sending tax writers scrambling to find additional revenue.
They may pursue a risky strategy to make up the shortfall: repealing the 2010 Affordable Care Act’s individual mandate. House Republicans are edging closer to accepting President Donald Trump’s suggestion to combine their tax legislation with a repeal of the mandate that all individuals purchase health insurance or pay a penalty, according to a person who’s helping to draft the tax bill.
Rolling back Obamacare’s insurance requirement would save the U.S. $338 billion over 10 years, according to a revised estimate Wednesday from the Congressional Budget Office, a smaller benefit than previously projected. The move risks alienating GOP senators, who voted down a measure that would have repealed the so-called individual mandate last summer.
While ending the mandate could free funds up for a tax overhaul, it would also leave more people without health insurance: CBO estimated in December that 15 million more people would be uninsured if the mandate was ended, and premiums would increase 20 percent. The agency is expected to provide an updated coverage estimate Wednesday.
Consideration of the individual-mandate repeal began to gain traction late Tuesday as Republican members of the House Ways and Means Committee came under pressure from GOP colleagues to preserve popular tax credits and deductions, said the person, who asked not to be identified because of the sensitivity of the matter.
It may gain even more traction after a report showed that changing one of the international provisions — effectively gutting a controversial proposal to tax U.S. companies’ payments to related foreign affiliates — along with some other last-minute changes from Monday evening would increase the 10-year deficit that the tax bill would produce by $160.7 billion, to $1.57 trillion, according to the Joint Committee on Taxation. The tax legislation must stay under the $1.5 trillion limit set in Congress’s 2018 budget resolution to avoid the threat of a Democratic filibuster in the Senate that could kill it.
Still, House Freedom Caucus Chairman Mark Meadows doubted that the repeal of the Obamacare mandate would be included in the House bill.
“There is a concern about having the health-care debate and tax reform happen simultaneously,” Meadows said earlier Tuesday. “House leadership hasn’t specifically said that but the indication, if I’m reading between the lines, is there’s no way it gets in the House version.”
Whatever the solution to bridge the gap is, it will likely be made behind closed doors. Despite the public debate this week, many of the most difficult decisions are being negotiated in secret between party leaders and individual members.
In addition to changes to international tax provisions, some GOP members want to restore the adoption tax credit, while others want to raise the mortgage interest deduction cap for new homes to $750,000 from $500,000. Yet others want to simplify rules that restrict which partnerships and other pass-through businesses can qualify for a tax rate of 25 percent.
The third day of the markup will likely include more back-room negotiations, as well as additional votes on amendments proposed by Democrats as lawmakers continue working their way through the 425-page tax bill.
It remains unclear what changes, if any, will be made to the bill before its expected approval by committee on Thursday. But Brady has said that once it reaches the full House for a vote, the legislation won’t be open to amendment. That means there are just two more days left to revise it. And two more days until the Senate plans to release its version of a tax bill, which could be significantly different from the House version. — Sahil Kapur, Anna Edgerton, Lynnley Browning, Erik Wasson and Anna Edney
What to Watch on Wednesday:
- The House markup is scheduled to start an hour earlier than it did on Tuesday, and could stretch late into the evening as Republicans try to meet their target of a final committee vote by Thursday.
- There could be changes to the bill’s provisions repealing the adoption credit and itemized deductions for medical expenses. Representative Tom Cole of Oklahoma said Tuesday those proposals are under discussion.
- More details about the Senate tax bill may emerge. Senate Republicans are said to be considering fully repealing individual federal tax deductions for state and local taxes — including property taxes, and preserving the estate tax. Both measures would conflict with the House legislation. Republicans on the Senate Finance Committee are trying to finalize their version of a tax bill, which they hope to unveil Thursday.
Here’s What Happened on Tuesday:
- The Ways and Means Committee voted down several Democratic amendments including limiting the debt increase under the bill after two years, restoring the state and local tax deduction, ending the SALT break for businesses if individuals cannot use it, raising the corporate tax rate enough to offset the cost of the bill, and restoring tax breaks for adoption and for employers who hire veterans.
- In one notable exchange, Representative Tom Reed, a New York Republican, demanded to know if Representative Bill Pascrell, a New Jersey Democrat, would support the tax bill if his amendment to preserve the veterans tax break was adopted. When Pascrell declined to say yes, Reed vented: “This is the game in D.C. that has brought us to gridlock.”
- For a full account of the day, click here.
To contact Bloomberg News staff for this story: Alexis Leondis in Washington at [email protected]
To contact the editors responsible for this story: Alexis Leondis at [email protected], John Voskuhl
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