One Republican senator said Wednesday he can’t support the GOP’s tax-cut plan, dealing a surprise blow to party leaders racing to make final tweaks and get a bill to President Trump this year.
Wisconsin Sen. Ron Johnson said the bill doesn’t do enough to boost small businesses, but said he’ll try to work to improve the measure before a final floor vote.
With a 52-48 margin in the Senate, Republicans cannot afford to lose more than one other member if they hope to pass a bill that now includes a repeal of Obamacare’s individual mandate.
The measure was being debated in a Senate committee Wednesday, even as the full House kicked off debate on its own $1.5 trillion tax-cut package Wednesday, speeding toward a Thursday floor vote.
“The American people have waited years for a fair, simple, and competitive tax code,” said House Ways and Means Committee Chairman Kevin Brady. “Right now, in this moment, we stand on the doorstep of delivering the most sweeping tax overhaul since President Reagan’s reform in 1986.”
House leaders have expressed confidence they’ll have the votes to pass their plan this week, but the announcement from Mr. Johnson, coupled with concerns from other senators, threatened to upend the GOP’s carefully-laid plans in the Senate.
Mr. Johnson, a past co-founder of a small manufacturing company, said he can’t support either House or Senate plans because they favor big corporations at the expense of small businesses.
“Unfortunately, neither the House nor Senate bill provide fair treatment,” he said.
Lawmakers in both Houses had already made changes to ensure more small businesses would benefit from the new rules and remain competitive with big corporations getting their tax rate slashed from 35 percent to 20 percent.
The House plan offers a new 25 percent rate for certain income from “pass-through” companies that file their taxes at often higher individual rates, and the Senate plan offers a 17.4 percent deduction for such businesses.
Democrats say they fear wealthy individuals will game the system and declare regular income as business-related, improperly claiming a lower rate.
Analysts have been split on how the new rules will work and how many smaller businesses would benefit.
Beyond Mr. Johnson, several other GOP senators have also expressed concerns with the plan.
Sens. Jeff Flake of Arizona and Bob Corker of Tennessee have said they don’t want to support a package that explodes federal deficits, and Sen. Susan Collins of Maine said inserting health care into the tax reform debate via the individual mandate repeal could complicate things.
Finance Committee Chairman Orrin G. Hatch defended the mandate repeal, saying it freed up money to provide bigger tax cuts elsewhere, and getting rid of it was good tax policy anyway.
“The individual mandate isn’t just any tax -— it’s a terribly regressive tax that imposes harsh burdens on low- and middle-income taxpayers,” Mr. Hatch said Wednesday.
The House plan does not include a mandate repeal.
Both the House and Senate plans cut individual tax rates, double the standard deduction, and expand the child tax credit, in addition to the changes on the corporate side. Both plans also weed out breaks, such as the state and local tax deduction, though the House plan does preserve a $10,000 local property tax break.
But the Senate plan, under changes Mr. Hatch made this week, puts a sunset on the tax cuts for individuals, meaning that rates would spring back after 2025. No such limit was put on corporate tax cuts.
“What a double standard that is,” said Sen. Ron Wyden, the top Democrat on the Finance Committee. “For multinational corporations their handouts are set in stone, written in ink, locked in place with the key thrown away. But not for the middle class.”
Republicans acknowledged that they included such temporary revisions to comply with budget rules, and that they have no intention of letting the tax hikes go into effect in the long run.
“If — once the bill is on the floor — my Democratic colleagues want to offer an amendment to waive the budget act to make the individual rates permanent, they likely won’t get much resistance from the Republican side,” Mr. Hatch said.
On the House side, meanwhile, Republicans took a major step forward in passing their own plan, adopting rules for debate on a 235-191 vote.
That sets up a final passage vote Thursday.
Republicans are billing tax reform as the GOP’s last hope to give voters a major reason to turn out in next year’s midterm elections, particularly after their months-long effort to repeal all of Obamacare came up short.
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