By Richard Rubin
WASHINGTON -- The sprint toward an enormous tax bill has reached
the starting line.
Republicans, eager to have something significant to show for
full control of the Congress and White House, are attempting to do
in as little as 10 weeks what took lawmakers 13 months in the
mid-1980s: Release, amend, debate and pass a rewrite of the U.S.
tax system.
In the frenzied days ahead, the GOP will seesaw between the
political necessity of obtaining a legislative win to tout in the
2018 elections and the immense difficulty of the task they've set
for themselves.
Republicans are optimistic about their prospects, and they have
been talking about "tax reform" for more than six years, kicking
around ideas, holding hearings and offering blueprints and
frameworks. But they have delayed the moment that's arriving now --
unveiling and voting on a bill that limits or removes popular tax
breaks -- and it's bound to be much tougher than any previous
stage.
The Senate's 51-49 vote late Thursday for a budget marked an
important step toward a tax bill that can become law by year's end
without a single Democratic vote. The House is expected to back the
same budget and set a schedule for the tax bill's release as soon
as next week.
Diane Black (R., Tenn.), who chairs the House Budget Committee,
made clear Friday morning that was the plan.
"I am pleased that the final version included some changes that
reflect many ideas offered in our plan," Mrs. Black said of the
Senate budget. "In the House, I look forward to swift passage and
to working with the president on tax reform."
Members of the House Freedom Caucus, a group of roughly three
dozen conservatives, largely backed the idea of the House quickly
taking up the Senate budget, said Rep. Dave Brat (R., Va.), who
participated in the group's conference call on Friday.
"Most of the folks were pretty much in favor of keeping the
momentum going," Mr. Brat said. The Freedom Caucus took no official
position, the group's spokesman said.
Here is the likely path for the tax bill through both houses of
Congress:
Budget Deal
The Senate and House must first agree on the same budget
document. The Senate budget and the one the House passed earlier
this month have some major differences, but that is no longer
expected to be much of an obstacle.
First, the Senate budget allows for tax cuts that reduce revenue
and increase deficits by $1.5 trillion over a decade; the House
version calls for a revenue-neutral tax bill that doesn't increase
deficits.
Second, the House budget ties $203 billion in spending cuts and
other deficit-reducing ideas to make room for tax cuts. The Senate
budget has just one such offset, which generates federal revenue by
potentially allowing the opening of Alaskan land to oil
production.
At first, it looked like negotiations to reconcile those
conflicting positions would take a week or two. But senators and
House members worked out a deal Thursday night under which the
House could vote next week without the need for a formal
House-Senate conference committee. That would expedite the process
of moving a tax bill.
The budget, which President Donald Trump doesn't need to sign,
allows Congress to use fast-track reconciliation procedures. Those
allow the Senate to pass a bill with a simple majority and not with
a 60-vote threshold that would require Democratic votes.
House Tax Bill
Rep. Kevin Brady (R., Texas), the top House legislator, says
that after the budget deal is delivered, his panel will release its
tax bill. That proposal will fill in many of the blank spaces in a
framework Republicans released in September.
It will spell out exactly what House Republicans plan to do with
tax incentives for retirement savings, child tax credits and other
points of contention. It will also show income cutoffs for various
tax brackets, giving Americans a chance to calculate their tax bill
under the new plan.
For businesses, it will show which companies qualify for a
special 25% rate for "pass-through" businesses such as partnerships
and S-corporations and will spell out which tax breaks go away.
Those details will stir disagreement among interest groups and
House members. The Ways and Means Committee, where Republicans have
a 24-16 edge and seven members who aren't returning in the next
Congress, will consider amendments and vote on the bill. Then it
heads to the House floor, where Republicans can lose 22 members at
most. Republicans will likely have to make some accommodation for
GOP members from New York and New Jersey, who oppose the repeal of
the state and local tax deduction that has been a pillar of the
party's plans.
House Speaker Paul Ryan (R., Wis.) has said a tax bill could
pass the House by early November.
Senate Tax Bill
The Senate Finance Committee will release its own tax plan.
Lawmakers expect it to be different from the House version, though
it isn't clear how far apart they will be.
In the committee, the GOP has a 14-12 edge, meaning it will have
to keep all its members on board. For now, votes from Democrats
aren't likely.
Democrats on the committee say Mr. Trump supports some of their
principles -- for example, a focus on the middle class instead of
tax cuts for high-income households -- but the plans so far haven't
backed up that specific objective.
The Senate bill will face some constraints because of the
fast-track procedures. It can't add more than $1.5 trillion to
deficits over a decade and it can't increase deficits at all after
a decade. Those rules mean Republicans may schedule some of their
tax cuts to expire.
On the Senate floor, Republicans can lose two members and still
pass a bill. That may be a challenge: Sen. Rand Paul (R., Ky.) has
called for significant tax cuts even if they increase budget
deficits, Sen. Bob Corker (R., Tenn.) has pledged not to increase
the budget deficit, and Sens. Mike Lee (R., Utah) and Marco Rubio
(R., Fla.) are seeking bigger child tax credits that aren't in the
GOP plan so far.
Democrats can offer unlimited amendments on the Senate floor,
putting them in a position to drag out voting and write proposals
that could peel off Republicans, such as increasing child tax
credits in exchange for higher taxes on millionaires. It was on the
Senate floor that Republicans' health-care plans fell apart this
year, when they couldn't get 50 senators to agree on any particular
plan.
Conference and President
Once the House and Senate have each passed their tax bills, they
will have to bridge any differences, presumably in a House-Senate
conference. Then the Senate and House will vote again and send the
measure to Mr. Trump for his signature.
Kristina Peterson contributed to this article.
Write to Richard Rubin at richard.rubin@wsj.com
(END) Dow Jones Newswires
October 20, 2017 18:41 ET (22:41 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.