Republicans race to finish tax bill as pressure mounts

Republicans struggled for a second day to finish their work on a tax-cut plan, with President Trump arguing it should include ending ObamaCare’s mandate and lawmakers debating how to pay for rate cuts.

Trump and House GOP leaders insisted that legislative text would be released on Thursday, though that seemed far from assured. And the difficulties already emerging for Republicans indicated just how challenging it would be to get a tax bill on Trump’s desk.

“We want to make sure it’s right. And arbitrary deadlines do not work. We saw that with health care,” Chief Deputy Whip Patrick McHenry (R-N.C.), a member of the leadership team, told reporters.

{mosads}The bill was initially expected to be released Wednesday, but the rollout was pushed back a day on Tuesday night.

“We’re not going to allow the idea of rolling it out on a Wednesday rather than a Thursday to determine something as substantive and important as tax reform,” McHenry said.

Leaving a closed-door meeting just off the House floor, GOP members of the Ways and Means Committee said late Wednesday afternoon that the bill is on track to come out on Thursday. White House officials who huddled with lawmakers on Capitol Hill were also upbeat.

Republicans are eager for a win on taxes after failing to repeal ObamaCare. GOP leadership has argued that Republicans are more in agreement on taxes and that the process has been better because the House, Senate and White House worked to get on the same page, releasing a joint framework for the legislation.

But the bill’s details have been closely held, and some lawmakers are getting frustrated.

“We started differently on tax reform than we did health care, but … I hope that we don’t end up back on the same tracks that led us to the debacle with health care,” said Rep. Mark Walker (R-N.C.), chairman of the conservative Republican Study Committee. “I think we are at a place now where the urgency of being able to see the text part of this is very important to members across the board, whether they’re coming from the moderate states or the conservative states.”

Another key conservative leader, Freedom Caucus Chairman Mark Meadows (R-N.C.), was spotted Wednesday evening huddling in a Capitol hallway with Gary Cohn, director of the National Economic Council, and other White House officials. Meadows said he was expressing concerns to Cohn about the Thursday rollout of the tax bill, though he declined to discuss specifics. 

Trump on Wednesday said repeal of ObamaCare’s individual mandate should be part of the legislation — an idea that had previously been rejected by the author of the House bill, Ways and Means Committee Chairman Kevin Brady (R-Texas).

“Wouldn’t it be great to Repeal the very unfair and unpopular Individual Mandate in ObamaCare and use those savings for further Tax Cuts for the Middle Class,” Trump tweeted. “The House and Senate should consider ASAP as the process of final approval moves along. Push Biggest Tax Cuts EVER.”

When asked about the mandate on Wednesday, Brady told reporters to “stay tuned.”

The Congressional Budget Office estimated that repealing the mandate would reduce the deficit by $416 billion over 10 years. And some top conservatives expressed support for including mandate repeal in the tax bill.

“I’ve been on board with that for several weeks,” Meadows said. “If you put that in tax reform, you’ve got a pay-for right there.”

But other GOP lawmakers in both the House and the Senate warned against mixing health-care issues and tax reform.

“At this late stage, I do not see health care coming into our tax bill,” said Rep. Chris Collins (R-N.Y.).

A key hurdle for lawmakers is figuring out how to meet their revenue targets. Under the budget resolution lawmakers adopted in order to bypass a Democratic filibuster, the measure can’t add more than $1.5 trillion to the deficit in its first 10 years. It also can’t add to the deficit outside the 10-year window if it’s to clear the Senate with only 50 votes, due to the chamber’s “Byrd rules.”

Brady signaled Wednesday that the planned 20 percent corporate rate might not be permanent in the bill initially, even though that is his objective.

“That’s our goal, and I think it’s going to take several steps through the process to achieve that,” Brady told reporters. “We have, as you know, in reconciliation, those awfully funny Senate Byrd rules, so that will enter into the discussion.”

Speaker Paul Ryan (R-Wis.) told leaders of conservative groups Tuesday that the bill would immediately cut the corporate tax rate from 35 percent to 20 percent, rather than phasing in the rate cut over several years. While conservatives cheered the news, the absence of a phase-in makes the rate cut more costly and could result in a phase out of the rate.

“It feels to me that going to 20 right away was a late-in-the-process decision that will put some pressure on the revenue in the 10-year window,” said Rohit Kumar, a former aide to Senate Majority Leader Mitch McConnell (R-Ky.) who now works at PwC.

Some of the details of the bill will depend on what compromise House GOP leaders make with blue-state Republicans over the state and local tax (SALT) deduction.

Republicans initially planned to fully repeal the deduction, which would raise more than $1 trillion to pay for the rate cuts. But they are scaling back their plans because of the concerns of GOP House members from high-tax states such as New York and New Jersey. The more the deduction is maintained, the more revenue tax-writers will need to find elsewhere.

Brady has said that the bill will keep an itemized deduction for property taxes but not for income or sales taxes. Blue-state Republicans said that leadership is considering a cap on the property-tax deduction — possibly in the amount of $10,000.

“I think we made big progress on restoring the property-tax deduction as part of state and local,” Brady said. “Many members feel this really provides them that middle-class tax cut and the other family relief they’re looking for.”

Some blue-state Republicans have been positive about a compromise focused on property taxes and the overall bill.

“If we can get the right number for property-tax deductibility, then I think we have something” said New Jersey Rep. Tom MacArthur (R).

Other Republicans, particularly those from the New York City area, said they still were interested in protecting the deduction for state and local income taxes.

“It’s something that’s very important to the people that I represent,” said Rep. Dan Donovan (R-N.Y.), who added that he wanted to wait and see what the bill looked like.

Besides SALT, Republicans have been wrestling with a number of other issues, including the tax treatment of 401(k) retirement plans, provisions aimed at preventing an erosion of the corporate tax base and rules about what businesses would benefit from a lower rate for “pass-through” entities that are taxed through the individual code.

They’re also working to try to focus the benefits of their legislation on the middle class as opposed to the wealthy.

“They’ve got setbacks on the pay-for side and on the base provisions side,” said a tax lobbyist who asked not to be named.