With Senate Republicans still celebrating their success in voting through a highly controversial tax bill, their colleagues in the House of Representatives have already begun the process of reconciling it with the bill they passed last month. On Monday, House Republicans voted to send the two bills to a joint House-Senate conference committee that will be tasked with drafting final legislation. The Republicans also named their five appointees to the committee: Representative Kevin Brady, of Texas, the head of the powerful Ways and Means Committee, will lead the process.
Both the House and the Senate will have to vote again on the final bill, but Republican leaders are expressing confidence that they’ll be able to get legislation to the President by Christmas. “This is the moment and the opportunity that we—and so many Americans—have worked for and waited for,” Brady said in a statement. “Now is the time to seize it. And working together—working truly together—I’m confident we will.” Kevin McCarthy, the House Majority Leader, said, on CNBC’s “Squawk Box,” “We can work and have this done this year.”
This confidence may be justified. Republicans have spent all year trying to get a major piece of legislation passed; falling short on their tax plan, with an election year looming, would be an unmitigated disaster for the Party. Reaching an agreement on the final bill, however, is far from a mere technicality. While the House and Senate bills are broadly similar, they differ in a number of significant details. And, in tax policy, the devil is almost always in the details.
For example, the bill passed in the House would abolish the individual and corporate alternative minimum taxes, which are designed to insure that households and firms pay at least a certain amount of tax no matter how many deductions they have and how clever their accountants are. For revenue reasons, the Senate, in its version of the bill, decided to modify the A.M.T. rather than abolish it. Yet McCarthy, in his CNBC interview, insisted that the corporate A.M.T. has to be eliminated. House Republicans also vehemently oppose keeping the personal A.M.T., and here they are likely to have an ally in the White House. In 2005, the most recent year for which we have seen Donald Trump’s tax returns, being forced to pay the A.M.T. raised his tax burden considerably.
Then there is the estate tax. Under the House bill, this tax—which hits on a few thousands bequests each year—would eventually be eliminated. In the Senate version, the threshold for being subjected to the tax would be doubled to eleven million dollars, but the tax would remain on the books. Other politically sensitive differences between the two bills include how they treat sick people and university students. Under the House bill, households that run up big medical bills would no longer be able to deduct the cost from their taxes, and graduate-school-tuition waivers would be treated as taxable income. The Senate bill doesn’t include either of these provisions, which the tax writers in the House included to raise revenue.
Even if the Republican conferees can reach an agreement on these provisions, there are two explosive non-tax issues that need to be resolved: the fate of the individual mandate to purchase health insurance, and the legal protections afforded to people who were brought to this country as undocumented immigrants when they were children—the “Dreamers.” Senate Republican leaders, in their drive to get to fifty-one votes, made pledges regarding these issues to two key senators: Susan Collins, of Maine, who helped defeat the G.O.P. effort to repeal Obamacare; and Jeff Flake, of Arizona, who is a fierce critic of President Trump.
Abolition of the individual mandate, which would devastate the Obamacare insurance exchanges, was part of the Senate bill but not the House one. Over the weekend, Collins said that in return for her vote for the Senate bill, Party leaders agreed to pass a separate piece of legislation—put forward by the Republican senator Lamar Alexander and the Democratic senator Patty Murray—designed to prop up the exchanges. “I got a commitment that we’re going to pass two bills, including the Alexander-Murray bill, and one that I’ve authored that will help offset the individual-mandate repeal by lowering premiums,” Collins said, on “Meet the Press.” “I also got an ironclad commitment that we’re not going to see cuts in the Medicaid/Medicare program as a result of this bill.”
Flake, in announcing his support for the Senate tax bill, said that the Republican leadership had promised to work with him on the immigration issue, which arose from the Trump Administration’s determination to phase out the Obama-era Deferred Action for Childhood Arrivals (DACA) program. (Under DACA, “Dreamers” are entitled to remain in the United States and work legally.) Flake said that he had secured a commitment in favor of a “a growth-oriented legislative solution to enact fair and permanent protections for DACA recipients.”
At this stage, it is by no means clear that the G.O.P. leaders will be able to deliver on the pledges they made to Collins and Flake, which are already coming under fire from some ultra-conservatives in the House. “I think this is exactly what the American people are sick of: learning about trading votes to modify the healthcare system and one fifth of the economy in exchange for a tax vote,” Dave Brat, a hard-line member of the House Freedom Caucus, told the Daily Beast, on Monday. Representative Mark Walker, the chairman of the Republican Study Committee, said, “I find it problematic to be promising something that the House has shunned from very early on.”
To be sure, these are just two voices, and most Republicans are desperate to get a tax bill passed. But getting the members of the Freedom Caucus and the likes of Collins and Flake to agree on anything won’t be easy, and, for procedural reasons, the members of the conference committee won’t have much freedom to maneuver. In order for the final legislation to pass the Senate with fifty-one votes rather than sixty, it will have to remain compliant with the Byrd Rule, which, among other things, means that the conferees can’t include any new provisions that would raise the budget deficit after 2027. If the committee decides to tilt the final legislation in the direction of one group of voters, or a particular interest group, for example, it will have to make up the lost revenue by hitting another group.
All of this should give some hope to Democratic activists and other angry citizens who staged protests across the country over the weekend. These protests will continue. Today alone, the group NotOnePenny.org, which opposes any tax cuts for corporations and wealthy individuals, is holding events in more than a dozen towns and cities. Protesters are also targeting individual Republican senators and congressmen. On Monday, several people staged a sit-in at Collins’s office in Bangor, Maine.
Opponents of the Republican tax proposal are hoping that, as it gets more scrutiny, it will become even more unpopular. On Monday, they got some more ammunition. The independent Tax Policy Center released a study of the bill that passed the Senate, and it showed that in 2018 about half of the tax cuts would go to the richest ten per cent of households. By 2027, the study said, the outcome would be even more slanted, with more than sixty per cent of the cuts going to the richest one per cent.
Chances are that, by January 1st, this regressive and unnecessary sop to the Republican donor class will be the law of the land. Right now, though, it’s not quite a done deal.
