Now comes the hard part. House Republicans cleared a tax overhaul Thursday after a pep talk from President Donald Trump, but the course is littered with speed bumps in the Senate.
Republican angst in the House — over the prospect of raising deficits by $1.5 trillion and delivering more benefits to corporations than people — is mirrored in the Senate, where the margin for success is razor thin and prospects for passage remain shaky. Several House members said they voted reluctantly for their chamber’s bill Thursday.
Like the House bill, the Senate version makes corporate tax cuts in the measure permanent, but phases out individual tax cuts by 2026, creating a political predicament for many lawmakers.
More ominously, the Senate version includes a repeal of the Affordable Care Act’s individual mandate, a risky proposition for a chamber that in July failed to repeal the legislation when three Republicans voted against doing so. The GOP controls 52 Senate seats, and if the 46 Democrats and two independents continue to oppose repeal, as expected, the tax bill faces a rough time.
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Sen. Susan Collins, R-Maine, who voted against the repeal in July, said Thursday that the tax measure “remains a moving target.” She told reporters earlier this week that she has concerns about ending the individual mandate in the tax bill, saying it “complicates” the issue.
Sen. John McCain, R-Ariz., who cast a dramatic “no” vote against repeal in July, said Thursday that he’s not yet “looked at the entire (tax) package,” though he suggested earlier in the week that he was not opposed to including the repeal in the tax bill.
Sen. Ron Johnson, R-Wis., who voted for repeal, has already said he has problems with business-related provisions in the Senate bill and opposes it.
House members, too, were cautious about what comes next, though often for different reasons.
“It’s fundamentally a corporate tax reduction bill,” Rep. Mark Sanford, R-S.C. who voted in favor of the bill, told McClatchy earlier in the week.
House Republicans who have railed against deficit spending for years voted for the measure and said they expect it to be paid for by boosting the economy.
“It appears based on my back of the envelope numbers, that it pays for itself over about a 15-year period,” said Rep. Mark Meadows, R-N.C., who chairs the fiscally conservative House Freedom Caucus.
But, he noted, even though nearly every caucus member voted for the bill, “the lion’s share of those guys believe there is a whole lot more work to be done.”
Several House members made it clear they voted for the measure so that the House and Senate could hash out differences before drafting a final bill. If the Senate passes its version, a special House-Senate committee would write a compromise version.
“I will vote for this monstrosity with the hope that many of these things will get taken care of ... and people come to their senses,” said Rep. Ileana Ros-Lehtinen, R-Fla., of the House bill. But she did not rule out voting against the final bill if enough changes aren’t made.
In at least one case, Ros-Lehtinen favors the current Senate version: The House scrapped a $250 deduction for teachers who buy school supplies out of their own pocket, but the Senate would double the deduction.
“Why take it out on the little guys like that?” said Ros-Lehtinen, a former teacher.
The Republican legislation also threatens to end many breaks for state and local taxes. Republican opposition came almost entirely from legislators who represent three high-cost, high-tax states that would be among the biggest losers under both the House and Senate versions.
New York and New Jersey Republicans have been speaking out for weeks against the legislation, which would eliminate the ability to write off state and local income and sales taxes from federal tax bills. In a compromise, the House bill keeps the property tax break, but caps it at $10,000.
The legislation would hit urban and suburban home buyers in those states by lowering the cap on mortgage interest deductions to the first $500,000. That’s a particular concern in California’s overheated housing market, where the median home sale price now hovers around $500,000.
Despite the outsized impact it would have on the Golden State, just three of California’s 14 Republicans voted no: Darrell Issa, Dana Rohrabacher and Tom McClintock.
Rohrabacher told reporters he made his decision after talking to a Republican who told him he was barely hanging on to his home. He said the man said, “If your bill passes I’ve calculated that my taxes are going to be up about $8,000 and we’ll have to take my son out of private school.” The Orange County Republican added, “Okay, I’m not going to do that.”
In the Senate, Republicans have proposed to eliminate all the state and local tax breaks,including for property taxes, which could scare off even more House Republicans.
Some senators are willing to compromise.
“I think that's something we'll work on both through our process and then with the House,” Sen. John Hoeven, R-N.D., said last week. Hoeven said he’d like to see the property tax deduction preserved in the Senate bill.
California’s McClintock, however, argued that tax writers should have given higher priority to tax relief than to tax simplification. He’s skeptical there will be a fix.
“It is rare for the conference (compromise committee) process to improve bills, and a commitment to provide taxpayer protections in the final version has not been forthcoming,” he said.
Alex Daugherty, Emma Dumain and Brian Murphy contributed to this report.