The latest version of the Senate bill to overhaul the U.S. tax code solves some problems for Republican leadership, but potentially creates a host of others.
The updated chairman’s mark would direct more tax relief to lower- and middle-class Americans through several new provisions, including a proposed reduction in the tax rates for the current seven income brackets. But those cuts would now be temporary and expire in 2026. At the same time, the proposal would make the reduction in the corporate tax rate from 35 percent to 20 percent permanent.
The new framework, released late in the evening on Tuesday, is sure to alienate Democrats, some of whom had kept open the possibility of supporting it.
If there were any doubts that Republicans were bent on advancing the tax bill with only GOP support — allowable under the fast-track budget procedure the party is using — those were squashed by Senate Majority Leader Mitch McConnell.
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“This is largely a partisan exercise,” the Kentucky Republican said on Tuesday at a Wall Street Journal CEO Council event.
One major sticking point for Democrats (and maybe some Republicans) will be the last-minute attempt by the GOP to gut the 2010 health care law.
The updates in the latest bill summary were possible in part because it would repeal the law’s individual insurance mandate — an addition that will appease members like Sens. Tom Cotton of Arkansas and Ted Cruz of Texas.
The inclusion of the repeal opened up over $300 billion in additional revenue, but thrust what is sure to be a controversial health care debate into already complex negotiations on the tax bill.
“It gives us a shot at making the corporate tax rate permanent,” McConnell said of the additional money. “[It] also provides some additional funding to plus up some of the middle-class tax relief.”
Some members, like Sen. Susan Collins, want to raise the corporate tax cut above 20 percent to offset greater tax cuts on the individual side of the ledger. The Maine Republican had also expressed skepticism at including the repeal of the mandate, which the Congressional Budget Office has said could result in the loss of insurance for millions of individuals and possible price spikes for sicker Americans.
The changes have, however, won some early support.
Some Republican members skeptical of the prior version — like Sens. Mike Lee of Utah and Marco Rubio of Florida — praised the updated summary, specifically the enhanced child tax credit, which would now go from $1,000 per child to $2,000.
“I am thrilled to hear that the revised Senate tax reform proposal will double the child tax credit to $2,000 per child. Details are still being worked out, and I eagerly await their release. But if true, this could provide unprecedented tax relief for working moms and dads, and a great victory for American families,” Lee said in a statement.
But it remains to be seen how more moderate members will view a bill that puts a priority on business tax cuts over tax relief for the large portion of American households.
Experts say the sunset of the individual tax cuts, combined with a tighter rate of inflation could lead to significant increases for middle-class households in the latter years of the ten-year budget window. Some members, including Cruz, said the prior bill did not go far enough in providing tax relief for Americans.
There is some precedent for Congress passing tax overhauls with major sunsets. The tax legislation signed into law under former-President George W. Bush included major individual tax cuts that expired in 2013. Those were extended only after intense negotiations between the White House and Congress.