Senate GOP’s Tax Bill Tries To Avoid Hiccups Of House Bill

Seemingly learning from the rocky rollout of their House counterparts, Senate Republicans announced a tax cut framework Thursday that preserves many popular tax breaks for adoptions, medical expenses and home mortgage interest, while promising lower taxes for most Americans.

The blueprint also slashes the corporate income tax rate to 20 percent, as the House bill does, but delays its effectiveness for a year.

Senate Republicans said they also will eliminate a popular deduction for taxpayers to offset their state and local income and property tax payments, but their plan nearly doubles the standard deduction that most taxpayers use, expands the per-child tax credit from $1,000 to $1,650, eliminates the alternative minimum tax that socks upper-middle-class taxpayers and doubles the amount of income that can be transferred before the estate tax kicks in.

For individuals, the plan would leave seven tax brackets in place — the same as now — but set new rates of 10 percent, 12 percent, 22.5 percent, 25 percent, 32.5 percent, 35 percent and 38.5 percent, and adjust the thresholds so they begin to bite significantly higher than current law. For example, the top tax rate wouldn't kick in until individuals make $500,000 or married couples make $1 million.

The bill would produce $1.5 trillion in deficits over the next decade, in line with the Republicans' budget outline approved earlier this year.

"We have been laser-focused on reducing taxes for the middle class. That is what this will do," said Sen. Orrin G. Hatch, Utah Republican and chairman of the Senate Finance Committee, who will shepherd the bill.

He said the plan was written only by Republicans, but he hopes Democrats will join the effort as it moves to committee and then to the Senate floor.

The Senate plan is slightly more beneficial to individual filers than the House bill and slightly less generous to businesses — though businesses are still the big winners in each. About $600 billion of the $1.5 trillion in tax cuts, or 40 percent, go to individuals in the Senate version, while only about a third of the House bill did.

The new plan, like the House bill, does switch the rate of inflation to a slower-growing index known as chained CPI, which amounts to a gradual tax increase stretching into the future. All told, it's worth more than $130 billion in additional revenue to the government — and cash lost to taxpayers — over the decade.

President Trump, who has been cheerleading Republicans' efforts, gave them a thumbs-up, with the White House calling the Senate bill "another important step toward providing historic tax relief for the American people."

But cracks were already showing within the Republican Party.

"I remain concerned over how the current tax reform proposals will grow the already staggering national debt by opting for short-term fixes while ignoring long-term problems for taxpayers and the economy," said Sen. Jeff Flake, Arizona Republican. "We must achieve real tax reform crafted in a fiscally responsible manner."

Sen. Marco Rubio, Florida Republican, and Sen. Mike Lee, Utah Republican, said they are holding out for an even bigger per-child tax credit of $2,000 and applying it to even more income so poor people could get more money back.

"The Senate is not going to pass a bill that isn't clearly pro-family, so we look forward to working with our colleagues to get there," the two senators said in a joint statement.

Still, Republican lawmakers who appear to be supporters said they were disappointed that the plan doesn't repeal the Obamacare individual mandate requiring Americans to have health insurance.

"We can improve this bill, and the first priority should be to repeal this unfair tax," said Sen. Tom Cotton, Arkansas Republican.

He and his allies had said repealing the mandate would leave millions of Americans free to choose not to purchase insurance, saving the government more than $300 billion over the next decade because taxpayers no longer would have to subsidize coverage.

Despite pressure from conservatives, the House bill doesn't touch the Obamacare mandates either. But there are other differences:

⦁ The House legislation cuts the corporate rate beginning in 2018, which the Senate plan delays for a year.

⦁ The House bill axes the estate tax altogether, while the Senate blueprint doubles the exemption rate but leaves the overall tax in place.

⦁ Senators eliminate the deduction for state and local income and property taxes altogether, while the House bill would preserve a deduction of up to $10,000 for property taxes.

Democrats said that last provision, the full repeal of what is known on Capitol Hill as SALT, will prove deeply unpopular for suburban voters.

"I guarantee you, if they pass this bill this way, and I hope they don't, in February, March, April, you will be writing stories that say, 'Whoa, look what was in the bill and no one knew.' That's just how taxes and tax bills are," Mr. Schumer said.

He said this week that he doubts any Democrats will sign up for the Republican bill.

Republican aides, though, said many ideas in the bill were supported by Mr. Schumer and his fellow partisans just a few years ago.

If Mr. Schumer is right in his prediction of no Democratic support, it would leave Republicans, who have 52 seats, with an incredibly narrow path to victory. A defection of just three senators would doom their effort.

Mr. Hatch plans to push the bill through his committee next week, setting up a floor fight after Thanksgiving.

Mr. Trump has said he wants to sign a bill this year.