GOP nears initial victory on tax reform

House Republicans are on the precipice of a big victory on tax reform, but the legislation still faces enormous hurdles before it can reach President Trump’s desk and be signed into law.

Legislation is expected to receive a vote on the House floor this week after clearing the tax-writing Ways and Means Committee in a party-line vote with no GOP defections.

At this point it would be a surprise if Republicans weren’t able to pass the bill through the House.

{mosads}The number of Republicans publicly opposed or leaning against the bill is in the single digits, and Speaker Paul Ryan (R-Wis.) appears poised to meet his ambitious timeline of having the tax bill introduced in early November and passed by Thanksgiving.

“I do believe that the momentum continues to move us forward,” Rep. Mark Walker (R-N.C.), chairman of the conservative Republican Study Committee, told The Hill.

He said Republicans can’t afford to hold off the bill after the failure to approve ObamaCare repeal. Last week’s losses in off-year elections across the country just added urgency for Republicans.

“It will be difficult for members who voted against ObamaCare repeal to go 0-for-2 on their campaign promises,” Walker said. “I’d look for a huge vote.”

An amendment Ways and Means Committee Chairman Kevin Brady (R-Texas) added to the bill on Thursday bolsters the odds of a successful House vote.

The amendment created a new 9 percent tax rate for some small-business income — earning the support of the National Federation of Independent Business, which panned the initial House bill. It also restored the adoption tax credit, a top priority for conservatives.

“It definitely made the bill stronger,” said Rep. Jason Smith (R-Mo.), a member of both GOP leadership and the tax committee.

Brady noted that these changes were inspired by the suggestions of GOP lawmakers on the committee. He said he heard from every one of the panel’s Republicans that they needed to provide more help for small businesses, and he noted that Reps. Diane Black (R-Tenn.) and Mike Kelly (R-Pa.) have been big champions of the adoption tax credit.

Following the markup, Republicans on the Ways and Means Committee were upbeat.

GOP vote-counters predicted the tax bill would attract between 225 and 230 Republican votes — well above the 218 votes needed to pass it. Republicans will pick up another “yes” vote on Monday, when Rep.-elect John Curtis (R-Utah), who backs the tax plan, takes the oath of office.

“We feel really good,” one White House official told The Hill. “A bill will pass the House next week for sure.”

The handful of GOP lawmakers who have come out against the bill are mostly from high-tax blue states who are concerned because the bill does away with most of the state and local tax (SALT) deduction.

“My message to our leadership is it is a matter of fundamental fairness that [the SALT deduction] be preserved and that there shouldn’t be winner states and loser states,” said Rep. Leonard Lance (R-N.J.), a top Democratic target in 2018 who is whipping “no” on the bill.

Others haven’t committed yet to supporting the bill. Some conservatives have expressed concerns about the fact that the measure keeps the top tax bracket at 39.6 percent and creates a “bubble rate” above that for some income of high earners in order to claw back the benefits of the 12 percent bracket for the wealthy.

Rep. Andy Biggs (R-Ariz.), a member of the hard-line House Freedom Caucus, told The Hill on Friday that he was still undecided.

He said there are “a lot of really good things in the bill” and was happy to see the adoption tax credit restored. But he also wished the bill’s tax cuts were retroactive and thinks that Congress should ensure that every taxpayer sees a rate reduction.

“I’m a little bit disappointed that we’re not eliminating the clawback provision,” he said. 

Biggs added that he’s “hopeful that the process continues to be open to changes.”

Rep. Warren Davidson (R-Ohio), another Freedom Caucus member, said on Twitter Friday that he’s still looking at taxpayer scenarios under the bill.

“#TaxReform that raises your taxes is the wrong direction,” he tweeted.

While things look positive for the House vote, Republicans have missed past deadlines they have set for themselves. At the joint House and Senate GOP retreat in January, Ryan mapped out a timeline for rank-and-file Republicans showing they’d get a tax bill to Trump’s desk by August. They also failed to repeal ObamaCare, despite campaigning on doing so for years.

But Republicans are highly motivated to accomplish one of the top items on their legislative agenda, especially after last week’s election losses in Virginia.

“I think a lot of people in Washington are taking a message from the Virginia elections that voters are discontent with the lack of policy progress in Washington,” said Scott Hodge, president of the Tax Foundation. “And I think that’s provided some urgency to both the House and the Senate to get this tax-reform plan to the president’s desk before Christmas.”

Further challenges lie ahead.

Senate Republicans released their own tax bill Thursday that has many differences from the House’s measure.

The Senate bill fully repeals the state and local tax deduction. That would be unacceptable to many House Republicans from blue states, including some who appear likely to vote for the House bill.

And some aspects of the Senate bill may not be well received from conservatives in the House. The Senate measure does not repeal the estate tax and delays until 2019 cutting the corporate tax rate from 35 percent to 20 percent. The House bill slashes the corporate rate more immediately.

“To me, that is the biggest conflict between the House version and the Senate version,”  Walker said in the interview.

He and other GOP sources said there could be some minor, last-minute changes to the House bill before it gets a final vote, especially as House leaders pore over the details of the Senate proposal.

“I still think there are a few tweaks and adjustments to be made” Walker said.

Ryan made it clear that if both chambers pass tax bills, they would go to a conference committee rather than the House simply voting on the Senate’s measure.

But it’s not clear yet if the Senate bill even has the votes yet to clear its own chamber, where Republicans can only afford two defections. Some GOP senators, such as Jeff Flake of Arizona and James Lankford of Oklahoma, are concerned about the bill’s impact on the debt.

Meanwhile, Sens. Marco Rubio (R-Fla.) and Mike Lee (R-Utah) are pushing for the bill to further increase the size of the child tax credit.

A wild card in the process is Trump, who at times has weighed in on the tax process but is now abroad on a nearly two-week Asia trip.

Following reports that lawmakers were considering reducing the cap on pretax contributions to 401(k) plans, Trump tweeted that changes to the retirement plans would not be made.

More recently, Trump has been pushing for tax-reform legislation to include repeal of ObamaCare’s individual mandate. As of now, that’s not a part of either the House or Senate bills, but the idea is still under discussion.