As expected, the House and Senate passed the Republican tax cut bill yesterday and, after a second vote early today in the House due to technical changes made necessary by Senate budget reconciliation rules, the bill will likely be signed into law at the White House later today:
WASHINGTON — Republicans took a critical step toward notching their first significant legislative victory since assuming full political control, as the House and Senate voted along party lines on Tuesday and into early Wednesday to pass the most sweeping rewrite of the tax code in decades.
The $1.5 trillion tax bill, which is expected to head to President Trump’s desk in the coming days, will have broad effects on the economy, making deep and lasting cuts to corporate taxes as well as temporarily lowering individual taxes.
The endeavor was not without hiccups, however, as three small provisions in the final tax bill agreed to by the House and Senate were found by the Senate parliamentarian to violate the budget rules that Republicans must follow to pass their bill through a process that shields it from a Democratic filibuster. As a result, the bill changed slightly in the Senate, and the House will now need to vote on it again since both chambers must approve identical legislation. Among the items that were deemed out of order was the title of the bill: the Tax Cuts and Jobs Act.
The endeavor was not without hiccups, however, as three small provisions in the final tax bill agreed to by the House and Senate were found by the Senate parliamentarian to violate the budget rules that Republicans must follow to pass their bill through a process that shields it from a Democratic filibuster. As a result, the bill changed slightly in the Senate, and the House will now need to vote on it again since both chambers must approve identical legislation. Among the items that were deemed out of order was the title of the bill: the Tax Cuts and Jobs Act.
The approval of the bill in the House and Senate came over the strenuous objections of Democrats, who have accused Republicans of giving a gift to corporations and the wealthy and driving up the federal debt in the process.
As the final vote approached in the Senate, Chuck Schumer of New York, the Democratic leader, gave his closing argument against the bill and scolded his Republican colleagues for talking during his remarks on the floor.
“This is serious stuff,” Mr. Schumer said. “We believe you’re messing up America. You could pay attention for a couple of minutes.”
Representative Nancy Pelosi of California, the House Democratic leader, called the tax bill a scam, saying it “is simply theft — monumental, brazen theft from the American middle class and from every person who aspires to reach it.”
On Tuesday afternoon, the House voted 227 to 203 to pass the bill, with 12 Republicans voting against it and no Democrats voting for it. Eleven of the 12 Republicans were from California, New Jersey and New York, states that would be hit hard by a provision in the bill limiting the deduction for state and local taxes to just $10,000. The Senate approved the bill early Wednesday morning.
The Senate voted 51 to 48, with no Republican defections and no Democratic support.
Under the final tax bill, the corporate tax rate would fall to 21 percent, from the current 35 percent, a move that Republicans are betting will increase economic growth, create jobs and raise wages. Individuals would also see tax cuts, including a top rate of 37 percent, down from 39.6 percent. The size of inheritances shielded from estate taxation would double, to $22 million for married couples, and owners of pass-through businesses, whose profits are taxed through the individual code, would be able to deduct 20 percent of their business income.
But the individual tax cuts would expire after 2025, a step that Republicans took to comply with budget rules, which do not allow the package to add to the deficit after a decade.
The tax changes will affect businesses and individuals unevenly, with winners and losers often being determined by industry or geography. An analysis by the Tax Policy Center found that the bill would reduce taxes, on average, by about $1,600 in 2018, increasing after-tax incomes 2.2 percent, with the largest benefit going to the wealthiest households.
The reach of the bill extends beyond taxes. It strikes at a core component of the Affordable Care Act, eliminating the requirement that most people have health coverage or pay a penalty, a move that the Congressional Budget Office projects will increase premiums for people who buy insurance. It also would open the Arctic National Wildlife Refuge in Alaska to oil and gas drilling, a defeat for environmentalists who have fought against such action for decades.
“Today, we are giving the people of this country their money back,” Speaker Paul D. Ryan of Wisconsin said before the House vote. When the bill passed the House, a giddy Mr. Ryan smiled broadly and banged the gavel with force as he declared victory.
(…)
Republicans in Congress moved with remarkable speed in their bid to enact the biggest tax overhaul since 1986, unveiling legislation to rewrite the tax code, marshaling support for their effort and devising a compromise between the House and Senate in under two months.
The success within reach would be a stark contrast with their attempt this year to repeal and replace the Affordable Care Act, a quest that was encumbered by internal divisions among Republicans and ultimately ended in humiliating failure.
“People wanted to get it done,” Senator John Cornyn of Texas, the No. 2 Senate Republican, said of the tax rewrite. “That’s the single biggest difference.”
It would also give Mr. Trump a signature accomplishment as the first year of his presidency nears an end. After the House vote, Mr. Trump took to Twitter to congratulate House Republican leaders as well as “all great House Republicans who voted in favor of cutting your taxes!”
Shortly after 1 a.m. Wednesday, Mr. Trump acknowledged the Senate’s vote in a tweet: “The United States Senate just passed the biggest in history Tax Cut and Reform Bill. Terrible Individual Mandate (ObamaCare)Repealed.”
As I noted above, the House will be required to vote on the bill again this morning due to minor technical changes that were made necessary in order for the bill to qualify for the Senate’s budget reconciliation rules which allowed Republicans to pass the bill with a bare majority rather than having to find sixty votes to invoke cloture, which obviously would not happen. The changes themselves are relatively minor and include one provision that would have allowed parents to use 529 savings accounts to pay for homeschooling expenses and the criteria used to determine if colleges and universities must pay an excise tax on their investment income. Additionally, the Senate Parliamentarian ruled that the name that was given to the bill by the House, the “Tax Cut And Jobs Act,” was not permissible because the part of the bill
The last-minute parliamentary stumble involved three small components of the bill, according to Senate Democrats, including a provision that would have allowed the use of 529 savings accounts for homeschooling expenses and part of the criteria to be used to determine whether colleges and universities are subject to an excise tax imposed on their investment income. The parliamentarian even ruled against the bill’s name, the Tax Cuts and Jobs Act, since the provision creating the name did not influence spending or revenue, as each provision must under Senate budget rules. Those provisions were eliminated in the version the Senate voted on last night, so that means the House must vote again on the bill this morning. There’s no doubt that the bill will pass the House on a party-line vote once again, of course, and the bill will most likely be signed by the President later today in a ceremony at the White House that will likely include most if not all of the Republicans in the House and Senate and turn into something of an end-of-the-year celebration given that the GOP has had very little to celebrate by way of accomplishments so far in the Trump Administration.
The two big questions, of course, are what impact this bill will have on the economy and on politics as we head into the midterm elections.
On the economic side, Republicans contend that the bill will result in more money in the hands of taxpayers and corporations, which will lead to economic growth and increased wages across the board. Democrats, of course, contend that the cuts contained in the bill will largely benefit high-income earners and that corporations will not pass on whatever tax savings they experience to works or use it for new investment that helps to create new jobs. The reality is that right now, we can’t really tell for sure which side of this debate will end up being correct, and outside of forecasts, many of which have been put forward by groups and economists with identifiable partisan preferences, there isn’t a lot reliable, testable data out there to work with. That being said, I think it’s fair to say that the forecasts being offered by Republicans are most assuredly overly optimistic to say the very least. Forecasts of economic growth between 4% and 5%, for example, are unlikely to come to pass based quite simply on the fact that this is a level of economic growth we haven’t seen except for isolated quarters in more than twenty years now. That, combined with the fact that we’re in the eighth year of the economic recovery suggests that we’ll be lucky to see economic growth in the 3% to 3.5% range right now. Additionally, it’s unclear what corporations might do with the tax savings they might get from this bill. One survey of CEOs showed that the people interviewed would be more likely to return any tax savings to shareholders via stock buybacks than to increase wages or engage in new investment that would require more hiring, but that may not be true in all sectors of the economy. Notwithstanding that caveat, though, it’s worth noting that it would take more than just tax savings for most businesses to either increase wages unless its necessary to attract or keep works or to invest in new technologies unless they were sure they could get a return out of that investment. Given that, any forecasts in this regard are premature at best. All that being said, it seems clear that Democrats are correct that the tax bill will likely benefit high-income earners far more than it will benefit the middle class.
Politically speaking, the impact of the bill is also far from certain, but it does seem like Republicans will have a hard time selling this bill to a skeptical public in the year to come. In the days before the bill was passed, for example, polling was indicating that public opposition to the bill was growing and the public was convinced that the Republicans never intended to pass a bipartisan tax bill. Given this, Democrats will no doubt use the tax bill as a major talking point heading into the midterms, arguing that Republicans failed to deliver on their promise of tax relief for the middle class and instead passed a bill that will have a far more favorable impact on high-income earners and corporations. Republicans, meanwhile, will have their work cut out for them in trying to convince anyone outside their base that the bill will be good for them in either the short-term or the long-term. If they fail to do so, then it will likely make what is already looking like a rough 2018 in both the Senate and the House even more difficult. In any case, for now, the GOP will celebrate their one big success of the first year of the Trump Administration. Whether they’ll still be celebrating a year from now is another question.
