McConnell Names Senate Conference Negotiators: Tax Debate Update

Updated on
Trump Says Tax Conference Will Result in 'Perfecto' Bill

House and Senate lawmakers plan to begin working this week on compromise tax-overhaul legislation -- a key step in their drive to send a package of tax cuts for corporations and individuals to President Donald Trump by the end of the year. Here are the latest developments, updated throughout the day:

McConnell Names Senate Conference Negotiators (7:18 p.m.)

Senate Majority Leader Mitch McConnell named eight Republican lawmakers to be part of the conference committee responsible for negotiating a final tax bill with GOP House lawmakers, according to a statement Wednesday.

Mitch McConnell

Photographer: Andrew Harrer/Bloomberg

The participants include six members of the tax-writing Senate Finance Committee: Chairman Orrin Hatch of Utah; John Cornyn of Texas, who’s also Senate Majority Whip; John Thune of South Dakota; Rob Portman of Ohio; Tim Scott of South Carolina; and Pat Toomey of Pennsylvania.

The other conferees are Senate Budget Committee Chairman Mike Enzi of Wyoming and Senate Energy and Natural Resources Committee Chairman Lisa Murkowski of Alaska.

“I’m confident that this distinguished group of senators will work to get the job done for the American people,” McConnell said in the statement. “I know everyone is ready to finalize our tax reform legislation and send it to the president so he can sign it into law.” -- Laura Litvan

Hatch Sees ‘Drive’ to Set 22% Corporate Rate (6:08 p.m.)

Senate Finance Chairman Orrin Hatch said “there is a drive” to set the corporate rate at 22 percent instead of the 20 percent that Senate and House bills have proposed.

Orrin Hatch

Photographer: Aaron P. Bernstein/Bloomberg

“They want more money, that’s why,” Hatch said, referring to other lawmakers.

Still, the Utah Republican said his preference is 20 percent, down from the current 35 percent level.

Senate Majority Whip John Cornyn shot down reports of an increase in the proposed corporate tax rate, saying it’s too early to consider raising the rate since Senate conference committee members haven’t even been named yet.

House Ways and Means Chairman Kevin Brady said he couldn’t confirm that raising the corporate rate to 22 percent was an option on the table, but said he continues to believe 20 percent is the appropriate level.

President Donald Trump unexpectedly suggested over the weekend that he was flexible on the 20 percent rate -- after the White House had previously insisted that it was a requirement for him.

“It could be 22 (percent) when it comes out,” Trump said Saturday. “We are going to see what ultimately comes out.”

Every one percentage point change in the corporate tax rate is roughly equivalent to about $100 billion in revenue over 10 years. Setting the rate at 22 percent instead of 20 percent would free up roughly $200 billion in revenue.

Going to 22 percent would face resistance from some other GOP lawmakers as well. Senator David Perdue of Georgia rejected calls to be flexible earlier this week.

David Perdue

Photographer: Andrew Harrer/Bloomberg

“One thing I’m adamant about is the 20 percent corporate rate has got to remain at 20 percent,” he said.

When told that Trump has indicated he’s flexible, Perdue, an ally of the president, said: “Well, I’m not.” -- Kaustuv Basu, Erik Wasson, Laura Litvan and Sahil Kapur

GOP Mulls Allowing State Income Tax Deduction (3:15 p.m.)

Republican lawmakers are discussing a compromise on state and local tax deductions that would allow taxpayers to deduct state income tax, House Ways and Means Chairman Kevin Brady said.

Under one proposal that’s being discussed, taxpayers could deduct both their state income tax and state and local property taxes up to a combined limit of $10,000, according to Representative Ryan Costello, a Pennsylvania Republican.

Current House and Senate bills would preserve an individual deduction for state and local property taxes -- capped at $10,000 -- but not for income taxes. The push to include income taxes could help those in high-tax states who don’t own property.

Senate Majority Leader Mitch McConnell said Wednesday he’s open to tweaking final tax legislation to appease lawmakers who want to let constituents deduct state income taxes.

Kevin Brady

Photographer: Andrew Harrer/Bloomberg

"There’s some in the House who would like to see that applied not just to property, but to income tax, you know, where you can sort of pick which state and local tax you want to deduct,” the Kentucky Republican said on conservative radio host Hugh Hewitt’s show. “That sounds like a kind of reasonable idea.”

“There are a lot of these things that are floating back and forth,” McConnell said, adding that he cannot predict “exactly how the final product turns out” once the House and Senate complete their conference negotiations.

House Republican leaders have signaled openness to relieving the burden for residents of high-tax states. Brady, who’s overseeing the House-Senate conference committee for tax negotiations, said Wednesday that allowing income tax deductions is one of five options on the table. Others include potential adjustments to rates, brackets, the individual alternative minimum tax and the family tax credit.

House Majority Leader Kevin McCarthy of California has also said he likes the idea of allowing taxpayers to deduct property and income taxes up to a certain limit. Property taxes can be relatively low in California while income taxes are among the highest in the nation.

It’s unclear how lawmakers would pay for any such modifications to the state and local tax break. Preserving the property tax deduction up to $10,000 would cost about $148 billion over a decade, according to the Joint Committee on Taxation. McConnell has been said to want any proposed changes presented with ways to pay for them.

Plans for the so-called SALT deduction have prompted more tension in the House than in the Senate, because there aren’t any Republican senators from states with the highest taxes. Twelve out of the 13 GOP House lawmakers who voted against the bill last month were from high-tax states. Still, including the property tax deduction in the Senate bill was a last-minute change to help get the support of Republican Senator Susan Collins of Maine.

Susan Collins

Photographer: Andrew Harrer/Bloomberg

Two House members from New Jersey -- Leonard Lance, a Republican, and Josh Gottheimer, a Democrat -- plan to submit a joint proposal to the conference committee that would maintain SALT in its entirety.

The lawmakers said repealing the break will lead to "double taxation" and "pay for reform on the backs of just a few states that already pay significantly more than other states in federal taxes." One of those net donor states, they note, is New Jersey.

They’ve proposed changing estate tax rules about stepped-up basis and closing what they call a loophole for charitable donations to private foundations as ways to offset some of the lost revenue that would result from keeping SALT. -- Erik Wasson, Sahil Kapur, Laura Davison and Kaustuv Basu

What to Watch on Wednesday:

  • The Senate will begin debate on the motion to proceed to conference -- up to 10 hours are permitted. Lawmakers selected to participate on the conference committee are likely to be named following the debate.
  • President Donald Trump has a cabinet meeting, which will likely include discussion of tax overhaul efforts.
  • House conservatives, who are pushing for a funding extension until Dec. 30, are meeting to discuss federal spending with Speaker Paul Ryan. Their objectives could threaten some of the deals Senate Republican leaders cut to secure votes for the tax plan, including heading off cuts to Medicaid and legislation to stabilize Obamacare insurance markets.

Here’s what Happened on Tuesday:

  • House Ways and Means Chairman Kevin Brady, who’s overseeing the House-Senate conference committee for tax negotiations, said repealing the corporate alternative minimum tax is “one of the priorities” for the conference.
  • The repeal of the individual mandate requirement that’s part of the 2010 Affordable Care Act -- a feature of the Senate bill, but not the House legislation -- is still under discussion, but is likely to have strong support among House Republicans, Brady said.
  • Two influential GOP senators -- Senator Rob Portman of Ohio, one of the chamber’s main tax writers, along with Senator Orrin Hatch, chairman of the tax-writing Senate Finance Committee -- said their preference is to repeal the corporate AMT.
  • Trump endorsed the work of the conference committee, calling the panel a “mixer,” where lawmakers will pick the good things and get rid of the things they don’t like.
  • Fifty-three percent of U.S. voters disapprove of the Republican overhaul plan, and 64 percent say it favors the wealthy, according to a Quinnipiac University poll released Tuesday. The poll was conducted from Nov. 29 to Dec. 4.

— With assistance by John Voskuhl, Erik Wasson, Sahil Kapur, Laura Davison, Kaustuv Basu, and Laura Litvan

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