News & Politics

Is the Tax Bill in Trouble in the Senate?

The GOP tax plan rolled out on Thursday has drawn some scathing reviews from Republicans in both the House and the Senate. But most observers believe that representatives will put aside their differences in the House and pass some kind of tax reform within the next month.

The Senate is a different matter entirely. That’s because Republicans can afford to lose only two senators or the measure will fail. With that slim margin, and several senators offering serious objections to parts of the plan, it appears that tax reform is in trouble in the Senate.

According to The Hill, the House is urging the Senate to write their own plan. “‘They’ve told us the House bill is just a shell and we’ll have our own bill. They’ve asked to hold off on commenting and to not pick it apart,’ said a Republican senator summarizing the instructions that Senate Majority Leader Mitch McConnell (R-Ky.) gave during a Thursday lunch meeting.”

But “picking it apart” is exactly what Senator Ron Johnson is doing. Johnson doesn’t like the formula the House is using for the business tax “pass through” which would severely impact small businesses. “The House bill would count 70 percent of a pass-through business’s revenue as wages, taxed at the individual rate, with the remaining 30 percent taxed as a return on capital at a new rate of 25 percent.”

“But Johnson argues that small businesses will wind up paying a blended rate of 35 percent, well in excess of the 20 percent tax rate the House bill sets for big companies classified as C-corps.”

Johnson called the House proposal “completely unacceptable.”

There is a problem with many of the offsets that will pay for the tax bill, especially reducing the mortgage tax credit which is one of the sacred cows of the tax code. For some senators,  those offsets aren’t enough —  and they are worried about adding substantially to the national debt.

Objections to the proposal are to be expected given how many oxes are being gored. Tax reform is about winners and losers and you can expect the losers to scream bloody murder. There is always the danger that the entire process will get hopelessly bogged down in detail.

This is where Trump would be most valuable. A president should set priorities in the bill, get a few big things that everyone can agree upon, lay down the law on what shouldn’t be in the bill, and then twist enough arms to get the legislation passed.

No doubt, Trump’s leadership skills will be fully tested  before a tax reform package passes Congress.