CRUNCH TIME: Republicans are set to close out their massive tax overhaul
- The House is scheduled to vote on the final version of the Republican tax bill on Tuesday, with the Senate coming soon after.
- The bill would substantially change both the business and individual side of the US tax code.
- Republicans are likely to support the bill overwhelmingly in both chambers of Congress.
The House is scheduled to vote on the final version of the Republican tax overhaul on Tuesday, kicking off a frantic rush to cement the bill into law before Christmas.
The Tax Cuts and Jobs Act, first introduced in the House just fewer than seven weeks ago, has been pushed through Congress at lightning speed to meet a self-imposed end-of-year deadline.
The last version of the TCJA was finalized on Friday after a conference committee merged versions of the bill from the two chambers into one conference report.
The vote in the House is expected in the early afternoon. If it passes, the TCJA will be sent to the Senate for a vote either late Tuesday or early Wednesday.
What's in the bill?
On the business side, large corporations would see their tax rate cut to 21% from the current 35%. Additionally, businesses would be able to fully deduct expenses immediately over the next five years. Outside of the headline items, specific industries like craft brewers will see significant adjustments and carve-outs to their tax bills.
Businesses in which the owner books the profits as personal income, called pass-through businesses (such as a limited liability corporate or S-corporation), would be allowed to deduct their first 20% of income attributable to the business. The bill calls for certain restrictions for wealthier pass-through businesses in an attempt to prevent wealthier firms with few employees, like hedge funds, from getting the benefit.
On the personal side, most Americans would see an immediate tax cut. The cuts, however, would expire after 2025 so that the bill qualifies under key Senate rules. While Republicans have said that the cuts will likely be extended by a future Congress, critics of the bill have attacked the planned sunset of the personal tax cuts, saying it shows the bill's priority lies with corporations.
Overall, most independent analyses of the tax bill determined that the TCJA would give a small boost to the US economy and, on average, cut taxes for Americans at every income level.
But despite Republican clams, no analyses show the bill would "pay for itself" by generating higher tax revenue from increased economic growth, with most showing an accumulation of around $1 trillion in new debt over 10 years.
Will it pass?
The TCJA appears to have a fairly smooth path to passage.
In the House, a handful of Republican lawmakers have said they will vote against the bill. They are predominately from states like New York and California, where many residents will lose a substantial amount of the benefit from the state and local tax deduction.
But passage appears baked in: Just 13 Republicans voted against the bill when it first came through the House, and the GOP can afford to lose as many as 22 votes.
The Senate will be slightly more complicated, said Issac Boltansky, an analyst at the research firm Compass Point, but only due to technical rules. The issue at hand is the so-called Byrd rule, which prevent provisions that don't deal with the budget from being added to legislation being considered under budget reconciliation.
Reconciliation, which the GOP is using to pass the tax bill, allows Republicans to move it on a simple majority vote. But it also means that Democrats can challenge some of the bill's provisions under the tightened rules.
"Debate in the Senate is limited to 10 hours, but Democrats are likely to use at least some of that time to procedurally challenge whether certain elements of the package conform to the Byrd Rule's requirements. ... Democratic challenges could conceivably prove to be speed bumps in the GOP's drive to tax reform in 2017, but our sense is that a material delay is highly unlikely," Boltansky said in a note to clients Tuesday.
While technicalities could slow down the process, Republicans almost certainly have enough votes to pass the bill. The absence of Sen. John McCain, who returned to Arizona to receive treatment for complications stemming from brain cancer, whittles the GOP majority down to 51-48. But key holdouts, including Republican Sens. Bob Corker, Susan Collins, Marco Rubio, and Mike Lee, all said they would vote for the bill in recent days.
That leaves Sen. Jeff Flake as the only Republican to not formally announce an intent to vote for the bill, likely giving the party a cushion.
"We continue to believe that the president will sign the tax bill this week, which should provide members of both parties with wide latitude to use painful Christmas puns liberally," Boltansky concluded.