WASHINGTON – House lawmakers powered through a third day of debate on the GOP tax bill Wednesday, a task made more difficult by a revenue hole of at least $74 billion in the plan.
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The gap stems from an amendment Republicans made late Monday that would cut an excise tax on multinational corporations proposed in the first version of the GOP bill.
The change removed 95% of that key revenue-raising provision, leaving the bill now outside its budget target, according to an estimate provided Tuesday by the Joint Committee on Taxation, the nonpartisan scorekeeper for tax legislation in Congress.
The bill's author, Rep. Kevin Brady (R., Texas), said it was "not unusual" for amendments to push a bill outside its revenue target. He said Republicans are looking at options. Those include repealing the individual mandate to purchase health insurance.
Mr. Brady said Wednesday afternoon that no decisions have been made.
Rep. Vern Buchanan (R., Fla.) said Republicans were talking about needed adjustments. "They've got dials, and they're having to turn dials," he said.
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Republicans also haven't said how they intend to address concerns from life-insurance companies and pass-through businesses that pay taxes through owners' individual tax returns.
"We're always looking to improve on the small-business side of things," said Mr. Brady, chairman of the House Ways and Means Committee. "I'm optimistic we'll continue to provide more relief."
The House Ways and Means Committee, which has been steadily rejecting Democratic amendments, plans to finish work on the bill Thursday. It's unclear when Mr. Brady will offer further changes.
Rep. Richard Neal (D., Mass.) and other Democrats have pressed Mr. Brady to give them time to review any major changes that are in the works.
"We don't know what your plan is because you change it every hour," Mr. Neal said.
Democrats have been hammering the GOP bill, arguing that it benefits high-income households and removes valuable deductions for items such as medical expenses and student loan interest.
The shape of a companion Senate tax plan was in flux Wednesday, with Republicans on the tax-writing Finance Committee set to hold more meetings later in the day. Senate Republicans said they're aiming to release their tax plan Thursday.
The bill is likely to be different in a few key areas, While the House plan partially preserves the individual deduction for state and local taxes and repeals the deduction for medical expenses, the Senate measure is more likely to repeal the entire deduction for property taxes and to leave the medical-expense deduction untouched.
One of the main policies yet to be worked out was whether to delay for a year a planned cut in the corporate tax rate to 20% from 35%. Senate Republicans, who were coming under White House pressure to immediately implement the rate cut, said they still hadn't settled the question.
"The goal is to get the cut started as quickly as possible. The only question is what the definition of 'as quickly as possible' is, and whether that's a year, whether that's January -- we have not determined that as far as I know," said Sen. Tim Scott (R., S.C.), a member of the panel. "It hasn't been locked in."
Treasury Secretary Steven Mnuchin has called the 20% corporate rate one of the most important elements of the tax plan. On Wednesday, he said President Donald Trump "feels very strongly he wants to start this right away. Having said that, we'll have to look at the entire Senate package. I assume it's really just a money issue as to how they're moving the different pieces around."
Republicans are still optimistic about their chances of passing a major rewrite of the tax code.
But the fluctuating revenue estimates of the House bill presented a new challenge. The 20% excise tax that House Republicans put in the bill they unveiled last week was designed to prevent companies from shifting profits out of the U.S. to low-tax countries, and the original version generated $154.5 billion over a decade to help pay for other tax cuts. The tax would apply to payments from companies with U.S. operations to related parties in foreign countries.
After complaints from businesses, including foreign-based auto makers, Republicans made a series of changes, adopted on a party-line vote late Monday. According to the JCT, the amendments gave back $147.5 billion of that revenue.
Business groups said the changes didn't go far enough to address their concerns. It isn't clear if Republicans will alter that tax further.
Other changes led to additional cuts of $13 billion, making the bill a $1.574 trillion tax cut -- beyond the revenue target of $1.5 trillion over a decade.
For technical budgetary reasons, the shortfall may be even greater.
Staying inside the revenue target isn't necessarily a fatal problem in the House, and Republicans have time to address the issue. But a shortfall would present a challenge in the Senate, where it could keep Republicans from passing the bill without Democratic votes.
Foreign taxes aren't the only area Republicans may adjust. Lawmakers have also talked about new changes for life insurers. And they are trying to respond to concerns about a 25% tax rate for pass-through businesses such as partnerships and S corporations.
Groups such as the National Federation of Independent Business say not enough businesses would benefit from the 25% rate. That's because professional-services businesses generally wouldn't get the break. Neither would businesses whose owners are in the 25% marginal tax bracket or below. The bracket above that would start at $200,000 for individuals and $260,000 for married couples filing jointly.
Any of those changes would require Republicans to find offsetting revenue elsewhere. One possibility emerged more clearly on Wednesday. JCT and the Congressional Budget Office released a new estimate showing that repealing the individual mandate to purchase health insurance would yield $338 billion over a decade.
Repealing the mandate generally raises money because fewer people would have insurance, and the government would thus spend less money on subsidies and Medicaid. But some Republicans worry about the political problems that come with adding health-policy questions to an already complicated tax bill.
Rep. Pat Tiberi (R., Ohio) said he was concerned about a piece of his party's plan that would eliminate tax-free private-activity bonds that finance hospitals, nursing homes and other projects. He said he was looking for a way to keep some of the program.
"The chairman has a really tough job, a balancing act that would be equivalent to someone on a circus wire," Mr. Tiberi said.
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(END) Dow Jones Newswires
November 08, 2017 17:23 ET (22:23 GMT)