Additional Changes Possible for Senate Tax Reform Legislation
Late Thursday, the Senate was nearing the end of debate on its tax reform legislation, but it appears the chamber must first address concerns about the federal budget deficit voiced by certain senators.
The Senate began debating H.R. 1, the Tax Cuts and Jobs Act, on Wednesday, Nov. 29, after clearing a key procedural hurdle and defeated a number of amendments on Thursday that sought to send the legislation back to the Finance Committee to be further amended.
An issue arose later on Thursday when the Joint Committee on Taxation released a study showing that the bill would still add $1 trillion to the federal deficit even after taking the economic effects into consideration. In addition, the Senate parliamentarian ruled that a proposed trigger mechanism violated the budget rules. That mechanism would reverse some of the tax cuts if the legislation didn’t achieve certain economic growth measures and added to the deficit.
These developments apparently rehashed the deficit-related concerns of Sens. Bob Corker (TN) and Jeff Flake (AZ). Additionally, Sen. Rob Johnson (R-WI) has concerns over the legislation not being favorable enough to pass-through businesses compared to C Corporations, but his concerns apparently are being addressed. As we previously noted, there have been reports that the Senate would add an amendment to increase the deduction for qualified business income of pass-through businesses from 17.4% to 20% as a way of addressing Johnson’s concerns.
Meanwhile, Sens. Mike Lee (R-UT) and Marco Rubio (R-FL) are proposing to increase the proposed corporate rate from 20% to 22% to offset an expanded, refundable child tax credit.
How will this all play out? It’s not clear at the moment. The Senate can lose the votes of only two Republicans and still be able to approve the legislation. The Senate returns to considering the legislation today and will begin voting on amendments at 11:00 a.m. ET. (For a live video stream of the Senate floor, click here.) It’s very possible, though not certain, that the legislation will be amended to address all of the various concerns.
Senate leaders are still interested in completing the legislation today. When the chamber began debating the legislation, there were more than 70 amendments pending, only a handful of which have been dispensed with. (Many of them likely will not actually be offered and voted on.) This sets up an end-of-debate “vote-a-rama” that could take hours to complete.
Meanwhile, the legislation did appear to receive a boost of momentum Thursday morning when Sen. John McCain (R-AZ) indicated that he would vote for it. Several other senators who previously expressed concern with various sections of the bill also dropped their opposition to the measure.
After Senate Passage
Assuming the Senate does in fact approve the legislation and the House does not simply accept the Senate-approved bill, the House and Senate will engage in a conference committee to resolve the differences and merge the two versions of H.R. 1 into one final bill. This final version must then be voted on again by the House and Senate. That process could take up to a couple of weeks, with final passage coming in mid-December.