House Approves Budget Plan, Paving Way for Tax Move

By Richard Rubin Features Dow Jones Newswires

The House adopted a budget Thursday that sets the stage for a rewrite of the U.S. tax system, overcoming internal doubts and beginning a six-day countdown for the release of the closely guarded details of the tax plan.

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The final vote on the fiscal 2018 budget was 216-212. All Democrats voted against the budget.

House Republicans now turn to the even tougher work of writing, amending and passing a tax bill, which they insist will happen by Thanksgiving. The idea is to sharply lower tax rates for individuals, corporations and other businesses while at the same time repealing or limiting enough tax breaks so that the measure dosen't lower projected revenue by more than $1.5 trillion over the next decade.

"The American people are screaming for a simpler, fairer, flatter tax code, one that makes American workers competitive, one that lets the American people keep more of what they earn," said Rep. Bill Johnson (R., Ohio) on Thursday morning ahead of the vote.

The House action follows a 51-49 Senate vote last week on the same budget. The nonbinding budget resolution doesn't need to be signed by President Donald Trump, and is separate from spending bills that actually fund the government. But it is a crucial step because Republicans can now use fast-track procedures that avoid a filibuster in the Senate, meaning they could pass a tax bill without Democratic votes.

Backed by business groups and conservative allies, Republicans see the next few weeks as essential for their economic agenda -- and their political futures.

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The House Ways and Means Committee plans to release a tax bill Nov. 1 and could consider amendments soon after. The outlines of the plan have been clear for months. Republicans want to drop the corporate tax rate to 20% from 35%, set a 25% rate on businesses that pay through their owners' individual tax returns, repeal the estate tax and make tax filing simpler.

What they haven't done is show how it all adds up or offer enough detail for families to calculate their future tax bills.

There are obstacles looming in every direction. In the House, where Republicans have a 239-194 edge, opposition by members from high-local-tax states narrows the party's margins significantly. So far, party leaders haven't been able to reach a compromise that would continue some federal tax break for local property taxes.

Some conservatives voted against the budget because it didn't do enough to restrain federal spending; the initial House budget would have tied $203 billion in deficit reduction to the tax bill.

The release of details will unleash a lobbying frenzy as businesses and interest groups see exactly how Republicans plan to pare back tax breaks. That will force the bill's authors to play defense.

Potential opponents include the real-estate industry and others such as private equity that rely on the ability to deduct interest costs.

Rep. Jim Renacci (R., Ohio), a Ways and Means member, urged Republicans to focus on the importance of lowering the corporate rate and warned about the risks of brokering deals to save particular tax breaks.

"Any time you make a change, you're going to have people who want to come talk about why that change is bad for them," he said. "In the end you could end up really causing some issues once you open up the door to one change."

In the Senate, the Republican margins are slim, just 52-48, leading to a potential repeat of the dynamics that prevented the party from overturning parts of the 2010 Affordable Care Act.

Republicans are likely to get little or no support from Democrats, who see the GOP tax plan as fiscally irresponsible and tilted too heavily toward high-income households.

"This is just tax cuts for the rich. This is not tax reform," said House Minority Leader Nancy Pelosi (D., Calif.). "It's not what our values are about. It's really a shame."

Write to Richard Rubin at richard.rubin@wsj.com

(END) Dow Jones Newswires

October 26, 2017 11:25 ET (15:25 GMT)