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Bill Seen Losing $1 Trillion After Growth: Tax Debate Update

Thursday, 30 Nov 2017 05:23 PM

The Senate tax bill is headed for a marathon debate this week after Republican leaders brought the measure to the floor Wednesday with the goal of holding a final vote by the end of the week. Here are the latest developments, updated throughout the day:

Senate Bill Seen Losing $1 Trillion After Growth (5:09 p.m.)

A new analysis released Thursday by the Joint Committee on Taxation found that the Senate tax bill would generate enough economic growth to lower its $1.4 trillion revenue cost by only about $458 billion over a decade.

After accounting for interest rates, the growth figure would fall to $407 billion, said the JCT, Congress’s official scorekeeper on tax legislation. That would leave a 10-year revenue loss of roughly $1 trillion.

The bill’s backers have argued the tax plan would pay for itself through robust economic growth resulting from the cuts -- but the new analysis is the latest among several to counter that argument. JCT estimated that the bill would boost gross domestic product by about 0.8 percent on average over the next 10 years.

Growth estimates are especially important for a trio of senators -- Bob Corker of Tennessee, James Lankford of Oklahoma and Jeff Flake of Arizona, who have voiced concerns about tax cuts adding to the deficit. The three support adding a revenue trigger to the bill that would provide for an automatic tax increase if revenue targets weren’t met, and Senate Republicans are wrangling over the issue.

Discussions have centered around a $350 billion tax-increase trigger, far short of the $1 trillion revenue loss the JCT projects.

A conservative-leaning policy center, the Washington-based Tax Foundation, released a statement saying JCT’s findings were “likely underestimating the economic growth spurred by this tax bill.”

“The range of estimates from JCT includes several important assumptions that limit its growth results, particularly, assumptions regarding the Federal Reserve’s response to potential inflation and the United States being a closed economy,” the policy group said in a statement. The group is working on its own score for the latest version of the Senate bill.

The Senate bill includes a provision that repeals all the individual tax cuts by 2026, which would tend to crimp economic growth. Senate tax writers included the expirations to make the bill comply with Senate rules against budget legislation increasing long-term deficits.

The new estimate “ends the fantasy about magical growth and claims that tax cuts pay for themselves,” said Senator Ron Wyden, the top Democrat on the tax-writing Senate Finance Committee, who called the finding the “total opposite” of what Republicans have said.

“It’s hard to see how they’re going to fix this with some kind of trigger,” Wyden said.

A spokeswoman for the Senate Finance Committee said official findings that the Senate tax bill would reduce federal revenue by about $1 trillion over 10 years -- even after accounting for economic growth -- “are curious and deserve further scrutiny.”

It’s unclear when that scrutiny might take place. Senate Republicans have already voted to begin debate on the tax bill, leaving little time for the sort of public consideration that typically takes place in committee hearings.

Nonetheless, Senate Finance spokeswoman Julia Lawless called the JCT analysis “incomplete” because the Senate bill is “evolving.”

Senators have so far written more than 70 potential amendments to the provision -- though it’s unclear how many of them might be considered. Senate Majority Leader Mitch McConnell has not announced any new timetable for a vote on the actual bill, though he and others have set a goal of passing it by the end of this week. -- Sahil Kapur, Erik Wasson and Laura Litvan

John McCain Says He Will Support Senate Bill (2:03 p.m.)

Republican John McCain of Arizona said in a statement Thursday that he’s decided to support the Senate tax bill -- helping GOP leaders get one step closer to passing their overhaul.

McCain hadn’t taken an official position on the tax plan until now -- and no one was taking his vote for granted after he shocked the political world by voting against a rushed attempt to demolish the Affordable Care Act this summer.

“I believe this legislation, though far from perfect, would enhance American competitiveness, boost the economy, and provide long overdue tax relief for middle class families,” McCain said in the statement.

The Arizona lawmaker joins Lisa Murkowski of Alaska -- another GOP senator whose support had been in question -- in publicly endorsing the Senate tax bill in recent days. The GOP has a slim majority in the Senate, and can only afford to lose two of its 52 members to pass a bill without Democratic support. Republican senators that could still prove difficult votes include Susan Collins of Maine, Bob Corker of Tennessee, Jeff Flake of Arizona, James Lankford of Oklahoma and Ron Johnson of Wisconsin.

Negotiations were ongoing Thursday to address some of the senators’ concerns, including over a trigger provision that would automatically increase taxes if economic growth doesn’t meet revenue targets.

It’s unclear how long the 20 hours of tax debate currently ongoing will stretch. It could continue into the wee hours of Friday morning before kicking off the unlimited amendment vote series known as “vote-a-rama” overnight. Republican leaders said Thursday morning they hadn’t yet decided whether to just resume the process Friday morning, since an all nighter for McCain and others would be hard, according to Collins. McCain is 81 and battling brain cancer.

McCain has pushed for the Senate to return to regular order -- hearings, markups, bipartisan input and amendments -- for passing major bills, including tax legislation. He had signaled support for the Senate Finance Committee’s process after it approved a tax proposal earlier this month.

McCain has had a mixed record on tax cuts, voting against measures in 2001 and 2003, citing deficit concerns.

“I take seriously the concerns some of my Senate colleagues have raised about the impact of this bill on the deficit,” McCain said. “However, it’s clear this bill’s net effect on our economy would be positive.”

McCain’s statement added to an already buoyant tone in the U.S. stock market. The Dow Jones Industrial Average extended its climb past 24,000 while the S&P 500 was set for its longest monthly winning streak since 2007, rising more than 1 percent. The dollar erased earlier losses, gaining as much as 0.6 percent against the yen as Treasuries declined, sending 10-year yields above 2.4 percent, to their highest level so far this month. -- Alexis Leondis and Chris Nagi

Collins Says ‘Not Committed’ on Bill Yet (9:33 a.m.)

Republican Senator Susan Collins of Maine said it “would be very difficult” to support the Senate tax bill unless Congress agrees to preserve an individual deduction for state and local property taxes and passes separate legislation to support the individual health care market.

“I am not committed to voting for this bill,” she said during a breakfast session organized by the Christian Science Monitor. She has said that Senate Majority Leader Mitch McConnell has committed to making health care legislation a priority.

Collins also said she’ll pursue an amendment to enhance the child tax credit -- and pay for the revenue cost by ending the “carried interest” tax break that favors investment managers. Carried interest is the portion of an investment fund’s profit -- usually 20 percent -- that’s paid to investment managers. Currently, it’s taxed as capital gains, meaning it qualifies for a tax rate as low as 23.8 percent. The top individual tax rate is currently 39.6 percent.

The Senate bill would address carried interest by requiring that only gains on assets held more than three years -- up from one year -- would qualify for the break. Collins called that provision “modest.”

Collins’s health-care concerns center on the Senate bill’s provision to repeal the Obamacare law’s individual mandate, which requires individuals to buy health insurance. Repealing the provision is estimated to save the federal government more than $300 billion over 10 years and result in roughly 13 million fewer insured people.

On the property-tax deduction, Collins said she’s seeking a provision that would mirror the House bill approved earlier this month: retaining the break for property taxes, but capping it at $10,000. Currently, the Senate bill proposes to abolish deductions for all state and local taxes. -- Erik Wasson

Corker Says Trigger Deal Still Facing ‘Difficulties’ (4:00 a.m.)

Senate Republicans are looking to approve their tax-overhaul legislation as soon as Thursday night -- but wrangling continues over whether to include a trigger for tax increases if economic growth doesn’t meet revenue targets.

“They’re having a few difficulties but hopefully in the morning they’ll have something,” Senator Bob Corker of Tennessee, who’s pushing for the trigger mechanism, said Wednesday evening. “There’s nothing to show right now.”

Corker and Republican Senator Pat Toomey of Pennsylvania are negotiating over the trigger concept, according to Senate Majority Whip John Cornyn of Texas. Corker and Toomey, both members of the Budget Committee, reached an agreement in September that allowed a budget that would add to the deficit.

Toomey said a deal would be announced Thursday, but declined to provide details.

Corker, along with Arizona Senator Jeff Flake and Oklahoma Senator James Lankford, have said their votes are contingent on the tax trigger. Others, like Senator Thom Tillis of North Carolina have said they are wary of the effect on the economy of tax increases during a recession.

While Senate Finance Chairman Orrin Hatch said he thought it was likely a trigger would be included, Senator David Perdue of Georgia countered that saying: “There is no foregone conclusion that we will have a trigger. Because there is a debate going on about that.”

“We’re not going to do anything to jeopardize this bill,” Perdue said.

In addition to deciding whether or how to include a future tax increase if revenue targets aren’t met, Republicans may have to tweak or add other provisions during the next 24 hours or so to secure the votes they need. Another change in the works would deepen the tax cut for pass-through businesses such as partnerships and limited liability companies.

All 52 Senate Republicans united to vote to open debate on the $1.4 trillion tax-cut measure Wednesday in the latest sign that the bill has the momentum it needs to pass. Republicans must have 50 of their 52 members vote “aye” in order to send the bill to a planned House-Senate conference, the next step in GOP efforts to get tax legislation to President Donald Trump by the end of 2017.

The Senate is now spending 20 hours of limited debate time on the tax bill. During that period, Democrats may try to strip out parts of the bill by raising objections to them based on Senate rules. Republican staff members have been working to tweak tax and oil-drilling provisions in the bill to comply with rules meant to exclude provisions that aren’t primarily fiscal in nature.

The formal debate time is set to expire close to midnight on Thursday, after which an unlimited amendment vote series known as “vote-a-rama” would ensue. Senators could agree to speed up the debate and start the amendment votes sooner.

During vote-a-rama, Democrats are likely to offer numerous amendments meant to highlight any flaws they believe the bill contains. Democrats say the bill gives most tax benefits to the wealthy while raising taxes on many in the middle and working class, in addition to increasing budget deficits.

“What’s on offer is a plan to force working people and middle-class families to pay for handouts to corporations and tax cheats," said Democratic Senator Ron Wyden as debate kicked off Wednesday evening.

Republican Senator Mike Enzi, chairman of the Budget Committee, disputed that characterization. “We need tax reform that will make our system simpler and fairer and allow people to keep more of what they earn,” he said. “This bill before us would do that.”

Some Republicans are expected to offer amendments that would be paid for by setting the corporate rate higher than the 20 percent proposed in the Senate tax bill. The current corporate rate is 35 percent.

Moderate GOP Senator Susan Collins filed an amendment that would retain the individual deduction for state and local property taxes and cap it at $10,000 for individuals -- mirroring the House tax bill. She said she would pay for the change with a 21 percent corporate rate and by keeping the individual top rate at 39.6 percent.

“I think it’s significant that many members believe that we don’t need to go all the way to 20 percent in order to spur investment and job creation,” Collins said.

Republican senators Mike Lee and Marco Rubio also plan to make the bill’s child tax credit refundable up to 15.3 percent of earnings, paid for with a 22 percent corporate rate.

Behind the scenes, Republicans will be crafting a final substitute amendment containing any changes they’ll need to get the required 50 votes.

Wavering senators Steve Daines of Montana and Ron Johnson of Wisconsin appear to be on track to support the bill after securing a 20 percent deduction for pass-throughs, an increase from the 17.4 percent in the draft bill. Johnson said Wednesday he expects to see the larger deduction included in the final version of the Senate legislation. He added he would support an amendment calling for the elimination of state and local tax deductions for corporations. -- Erik Wasson, Kaustuv Basu, Allyson Versprille and Laura Davison

What to Watch on Thursday:

  • Senate Republicans approved the “motion to proceed,” 52-48, on party lines. After up to 20 hours of debate, the chamber will begin considering a series of amendments proposed by senators in what’s known as a “vote-a-rama” marathon that’s likely to end with an amendment by Republican leaders incorporating all the changes.
  • Tax writers may release details of the trigger concept. GOP senators have discussed a provision that would allow for as much as $350 billion in automatic tax increases starting in 2022. Republican Senator Ted Cruz of Texas has said he’s working on a trigger provision that would apply two ways and bring additional cuts if there’s robust growth.
  • The nonpartisan Joint Committee on Taxation may release a “dynamic scoring” analysis of the bill’s effect on the deficit.

Here’s What Happened on Wednesday:

  • President Donald Trump said the tax overhaul would hurt him financially, disputing findings from the non-partisan Congressional Research Service and other analysts saying top earners would benefit more than the middle class.
  • Senate Republicans agreed to raise a proposed deduction for pass-through businesses, such as partnerships and limited liability companies, to 20 percent from 17.4 percent, according to Republican Senator Steve Daines of Montana.
  • Republicans Senators Marco Rubio and Mike Lee said they plan to introduce an amendment that would enhance the child tax credit -- and offset the cost by setting the corporate rate at 22 percent, higher than the 20 percent rate President Donald Trump favors. The White House said the president doesn’t support the amendment.
  • Republican Senator Susan Collins of Maine said she would vote to begin debate after she got a commitment from Republican leaders to put legislation aimed at stabilizing Obamacare’s insurance exchanges on a must-pass bill next month.
  • The bill got an important commitment as GOP Senator Lisa Murkowski of Alaska said she would vote for it.

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The Senate tax bill is headed for a marathon debate this week after Republican leaders brought the measure to the floor Wednesday with the goal of holding a final vote by the end of the week. Here are the latest developments, updated throughout the day:Senate Bill Seen...
tax, bill, loses, 1 trillion, deficit, trump, corker
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2017-23-30
Thursday, 30 Nov 2017 05:23 PM
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