Congress poised for a major test on tax legislation

Tax Reform Reuters

Tax reform is on schedule: Rep. Brady

Rep. Kevin Brady (R-Texas) on the Republican tax reform push.

WASHINGTON (Reuters) - The Republican-controlled U.S. Congress was approaching a major test on Thursday of its ability to enact sweeping tax cuts, as lawmakers prepared for their first full-scale vote on tax legislation.

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Republicans in the House of Representatives were expected to take up their bill to cut federal tax rates on corporations, small businesses and individuals after an 11:30 a.m. meeting with President Donald Trump, who wants to sign a tax package into law before year end. House leaders say they are optimistic about mustering the votes to approve the bill.

"Big vote tomorrow in the House. Tax cuts are getting close!" the Republican president tweeted on Wednesday night.

But Trump's tax reform hopes have begun to encounter resistance in the Senate. That chamber's version of the tax bill has faced criticism from some Republican lawmakers, including Senator Susan Collins, who helped sink a Republican effort to repeal Obamacare earlier this year.

Senate Republicans have made the risky decision to tie their tax plan to a repeal of the mandate for people to get healthcare insurance under former Democratic President Barack Obama's Affordable Care Act, exposing the tax initiative to the same political forces that wrecked their anti-Obamacare push.

Republican U.S. Senator Ron Johnson said Trump called him Tuesday night after Johnson announced his opposition to the current Senate plan over what he said were unequal rates for small businesses and non-corporate enterprises known as "pass-throughs," versus corporations.

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Still, Johnson said he was hopeful a final bill could be passed by year's end.

"I'm trying to fix it, and I want to vote yes," Johnson told CNBC, adding that Trump told him he would meet with Treasury officials on the issue. The president's public schedule did not list any Department of Treasury meetings for Thursday.

Republicans have long promised tax cuts and they see enacting the legislation as critical to their prospects of retaining power in Washington in the November 2018 congressional elections. So far, Republicans and Trump have no major legislative victories from 2017 to show voters despite controlling the White House and Congress.

"The American people have waited years for a fair, simple, and competitive tax code. Right now, in this moment, we stand on the doorstep of delivering," Kevin Brady, chairman of the tax-writing House Ways and Means Committee, said during the House tax reform debate.

Democrats have condemned both the House and Senate tax plans as giveaways to the wealthy and U.S. corporations, pointing to analyses showing that millions of Americans could end up with a tax hike because of the elimination of popular deductions. Repeal or reduction of some deductions is a way to offset the revenue lost from tax cuts.

"This is not a tax plan. This is a tax scam," said Representative Maxine Waters, a California Democrat.

The Senate and House tax plans must eventually be reconciled and merged into a final plan that can pass both chambers before it goes to Trump to sign into law.

The main challenge facing Republicans remains the 100-seat Senate, where they can lose no more than two votes from their 52-48 majority if they hope to enact tax reform.

"We'll find a middle ground and we'll get it to the president's desk ... This is a big deal for us," Republican Representative Tom Cole told MSNBC.

(Reporting by David Morgan and Amanda Becker; Additional reporting by Susan Heavey, David Alexander and Katanga Johnson; Editing by Peter Cooney and Frances Kerry)

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