Corporate Taxes

Senate Republicans Will Diverge From House in Sweeping Tax Rewrite

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But in the Senate, the emerging bill suggests party leaders are less concerned with the potential fallout of eliminating breaks that benefit upper-middle-class taxpayers in high-tax states such as New York and California.

Republican officials say many more changes will be included in the Senate plan, which is planned for release on Thursday, the same day that the House Ways and Means Committee is expected to pass its version of the bill ahead of a full House vote next week.

The Senate bill diverges from the House legislation currently under consideration in several key ways, starting with the provision to completely eliminate, rather than limit, the ability of individuals to deduct state and local income, sales and property taxes on their federal tax returns. The House bill would allow property tax deductions of up to $10,000, a limitation that is already under fire from House Republicans in New York, New Jersey and other states where constituents pay much higher property taxes.

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The major findings in a preliminary analysis of the House Republican tax plan.

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The Senate version will also seek to further limit the number of people who pay the estate tax, instead of eliminating the tax entirely as the House bill would do over time, according to officials in the White House and Treasury Department. In addition, the Senate bill will include more tax brackets than the four currently in the House bill. It will also jettison a controversial business tax currently in the House version that has caused an outcry from multinational corporations. The House provision would impose an excise tax of 20 percent on payments made by American companies to foreign affiliates, in an effort to prevent firms from shifting profits abroad through royalties and other payments made to subsidiaries or other foreign affiliates. American multinational corporations say the tax will wind up harming American companies and their consumers and drive up prices.

Influential conservatives inside and outside of Congress are warning Republican leaders that they must deliver a tax bill or risk alienating their biggest donors and their core voters. House Republicans from some politically moderate districts, particularly those in wealthy suburbs, are wrestling with the potential consequences of voting for a bill that could end lucrative tax breaks for many of their constituents. Democrats are all-but daring them to vote for the bill anyway, brandishing polling data suggesting voters will recoil at provisions that cut taxes for companies and the rich.

Those political cross currents are both aiding and complicating Republicans’ search for their first major legislative victory of Mr. Trump’s tenure.

Tuesday’s outcome “simply means we got to deliver” on the tax bill, House Speaker Paul D. Ryan of Wisconsin said at an event hosted by The Washington Examiner on Wednesday morning.

Hugh Hewitt, an influential conservative television and radio host, tweeted on Wednesday that the Republican Congress “must pass a tax bill or get wiped out in ’18.”

But several House Republicans have already spoken out against the House’s tax plan. Listing Republican losses on Long Island in Tuesday’s elections, Representative Peter T. King of New York said on Wednesday that the results should provide a wake-up call to lawmakers about the risk of losing middle-class voters who were drawn to Mr. Trump.

“I’m convinced we’re going to lose them with this tax bill,” Mr. King said. “The picture they see is an indifference to the middle class, but taking care of special interests. And that’s not why they voted for Donald Trump.”

Mr. King, who opposes the bill as written, rejected the idea that Republicans, above all else, must pass a tax bill so they can show a major accomplishment.

“How can you vote for tax reform if it’s going to increase the taxes in your district?” Mr. King asked, suggesting lawmakers would have to say: “Great victory! We got the first tax reform through in 30 years. Your taxes are going up, but it’s O.K., because we got it through.”

“People will think you’re nuts,” Mr. King said.

Republicans are pushing their bill through a process that would allow the legislation to pass without Democratic votes, but one Senate Republican cautioned on Wednesday that the election results show the need for bipartisanship.

“Perhaps that’s the message from the election, that Republicans and Democrats should work together to solve the country’s big problems,” said Senator Jerry Moran, Republican of Kansas. “While I think it’s important for us to accomplish tax reform, again how we do it and what the end result is matters.”

That is precisely the message that Democrats have tried to hammer home as they relentlessly criticize the bill. On Wednesday morning, emboldened Democratic leaders sought to capitalize on the electoral wins and pressure Republicans to abandon their plans to move forward with tax legislation that includes benefits for companies and the rich, along with tax cuts for some — but not all — middle-class families.

“The Republicans should look at the elections last night and it should be a giant stop sign for their tax bill,” Senator Chuck Schumer of New York, the Democratic leader, said at a news conference held outside the House Ways and Means Committee hearing room.

Mr. Schumer pointed out that Republicans were bludgeoned by losses in suburban districts on Tuesday night and suggested that the Republican tax plan would exacerbate those losses in 2018 midterm elections. He argued that the Republican plan to repeal the state and local tax deduction would cause particular pain to middle class families who live outside of cities.

Invoking Clint Eastwood, Mr. Schumer said, “You want to pass this tax bill? You want to hurt the suburbs? Make our day.”

Senator John Kennedy, Republican of Louisiana, said he found no broad meaning in the election results but said voters were counting on lawmakers to pass a tax overhaul and improve the economy.

“The Republicans are in charge, and we promised to fix it, and we have to go fix it,” he said. “If we don’t fix it, then the American people are entitled to say, ‘Well, you know, how’d you people make it through the birth canal, for God’s sakes?’ And I don’t blame them. They ought to be asking that question.”

“We’ve got to go pass this bill,” he added. “I’d rather drink weed killer than not pass this bill.”

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Wendy Pettit

Wendy Pettit is a writer for NYT and writes for other publications on her spare time. She lives in Chicago with her husband and her dog Zuko.

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