Top administration officials met privately with Republican senators Wednesday as Senate GOP tax writers put finishing touches on their high-stakes bill cutting levies on people and corporations and reshaping the federal tax code.
A day before Senate Finance Committee Chairman Orrin Hatch, R-Utah, planned to unveil the legislation, some of its most basic contours were set while others seemed in flux.
As leaders hunted for ways to pay for their tax cuts, Sen. David Perdue, R-Ga., said the measure would fully eliminate the deduction people can take for state and local property, income and sales taxes. The House version would retain the deduction only for property taxes and cap that at $10,000, drawing opposition from GOP lawmakers from states with high local taxes like New York and New Jersey.
Perdue said the Senate plan would compress the current seven personal income tax brackets down to four. On Tuesday, two Republicans had said the bill would retain the seven brackets but cautioned that changes were possible.
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Hatch's plan was likely to include a one-year delay in its reduction in the corporate tax rate, which will be permanent, said a GOP aide who spoke on condition of anonymity to discuss internal deliberations. Shrinking that rate to 20 percent from its current 35 percent has been a chief goal of President Donald Trump and the business community, and delaying that reduction would help contain the bill's costs.
"We're excited, everything looks good," Treasury Secretary Steven Mnuchin told reporters after he and chief White House economic adviser Gary Cohn met with Republicans on Hatch's panel in the Capitol late Wednesday.
The tax bill must worsen federal deficits by no more than $1.5 trillion over the coming decade. If Republicans don't do that, the measure will be vulnerable to a bill-killing Senate filibuster by Democrats that GOP senators lack the votes to block. It also cannot add to red ink beyond the first 10 years without facing the same fate.
Across the street, the House Ways and Means Committee completed a third day of debate on the nearly $6 trillion legislation, with the Republican-led panel wading through dozens of amendments and rejecting Democrats' efforts to revise the bill.
Republican leaders want the panel to approve the bill Thursday. Their goal is for Congress to send a measure to Trump by Christmas, which they hope would protect their congressional majorities in next year's elections.
A preliminary estimate by Congress' nonpartisan Joint Committee on Taxation said the House measure would add $74 billion more to 10-year deficits than the $1.5 trillion target allows.
Ways and Means Chairman Kevin Brady, R-Texas, plans to make last-minute changes in the measure before final passage, presumably to meet the target and nail down GOP votes so the House can approve the legislation soon. Democrats are expected to uniformly oppose the legislation.
The committee voted along party lines against a battery of Democratic proposals to restore to the bill tax benefits to student borrowers, people with significant medical expenses, homeowners and teachers.
The proposed elimination of the deduction for medical expenses not covered by insurance is especially controversial. The deduction has helped offset costs of such things as nursing home care, laser eye surgery and out-of-state travel for a second opinion on a rare cancer.
Eliminating it "is a direct assault," said Rep. John Larson, D-Conn., the failed amendment's sponsor. "This is devastating to individual families."
House Speaker Paul Ryan said the Republican drubbing in Tuesday night's elections "just puts more pressure on making sure we follow through" on the party's drive to overhaul the tax code.
Ryan, speaking at an event held by the Washington Examiner newspaper, said, "We've got to get on with keeping our promise, and one of the chief promises we made when we ran for office ... in 2016 was that we would do tax reform and tax cuts for families, for people, and so we've got to get on with that."
Ryan, R-Wis., spoke after Republicans lost gubernatorial races in Virginia and New Jersey by large margins in off-year elections that appear to be a bad omen for GOP chances in next year's midterms. The tax rewrite effort has assumed even greater significance in the wake of the GOP failure to repeal President Barack Obama's health care law.
Republicans have discussed repealing Obama's individual mandate in their tax legislation to raise more money to pay for tax cuts. That mandate requires most people to buy coverage or face a fine.
But the nonpartisan Congressional Budget Office lowered its estimate Wednesday for how much money repealing that requirement would save from $416 billion over a decade to $338 billion.
Repeal would save money because without being forced to get coverage, fewer people would sign up for Medicaid or buy federally subsidized private insurance.