The Senate passed its version of the Tax Cuts and Jobs Act. After the GOP leadership made a flurry of last-minute changes, the Senate early Saturday morning passed its version of the nearly 500-page bill. All Republicans voted for it except Bob Corker. All Democrats opposed it. The last-minute changes cut taxes more deeply on pass-through businesses but retained the corporate and individual alternative minimum tax, which the House bill would repeal. It also would raise the repatriation tax on foreign earnings.
About that 20 percent corporate rate. The Senate Republican leadership battled to the end to keep the bill’s proposed corporate tax rate at 20 percent, even though several senators would have raised it slightly to pay for other tax cuts. The leadership held the line, only to see President Trump tweet hours later that a 22 percent rate may be OK with him.
Whither the conference? Hill Republicans and the White House desperately want a final bill in three weeks, though there are many details that differ between the House and Senate measures. The House plans to appoint conferees today and the Senate later this week. As The New York Times reports, the differences that remain may indeed be resolved by Christmas. Not surprisingly, top Senate Finance Committee Democrat Ron Wyden doesn’t like either version: “The American people are going to be stunned when they see what’s really in this.”
Will the government stay open? This week, negotiations over taxes may take a back seat to talks over keeping the government open. Funding runs out on Friday, December 8, and Senate Majority Leader Mitch McConnell says Congress will keep the doors open. He told ABC’s This Week that “There's not going to be a government shutdown. It’s just not going to happen.” The House has offered a stop-gap funding measure that would fund the government until December 22. But lots of key spending and policy issues remain unresolved.
The Senate measure costs a lot and will not turbo-charge the economy. The congressional Joint Committee on Taxation published its final score of the Senate TCJA one hour after the chamber approved it: The bill would cost $1.45 trillion over the next ten years. TPC released its dynamic analysis of the Senate Finance Committee’s TCJA on Friday. It would boost the economy modestly until 2025 and by even less after many of its tax cuts expire in that year. The Finance panel’s version of the TCJA would barely change the size of the economy in 2027 or in 2037. Overall, it would increase deficits by $1.2 trillion over the next decade (not including added interest costs).
Will that high cost prompt cuts to entitlements? Bill Hoagland of the Bipartisan Policy Center told The Hill, “If we are talking about the kinds of deficits” projected from the Senate’s TCJA, “entitlement cuts are definitely on the table.” GOP leadership insists they are not but Maya MacGuineas of the Committee for a Responsible Federal Budget tells The New York Times, “Republicans have been telling themselves for years that they wanted to get into power so they could balance the budget, reduce the debt, cut spending and fix entitlements. They’ve just made it harder, not easier.”
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