House lawmakers kicked off a third day of debate on the GOP tax bill Wednesday morning, a task made more difficult by a growing revenue hole of at least $74 billion in the plan.
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.
Republicans haven't said how they will tackle the issue or what other changes they intend to make to the bill to address concerns from life-insurance companies and pass-through businesses that pay taxes through owners' individual tax returns.
But Rep. Vern Buchanan (R., Fla.) said Wednesday they were talking about adjusting pieces of the bill to make it fit inside the budgetary target. "They've got dials, and they're having to turn dials," he said. "The whole process is very interesting."
The House Ways and Means Committee plans to finish work on the bill Thursday. The Senate Finance Committee then plans to release its version of a tax bill, which is likely to be different in a few key areas. The Senate measure is more likely to repeal the entire individual deduction for state and local taxes and to leave the deduction for medical expenses untouched. The House bill partially preserves the deduction for property taxes and repeals the medical-expense deduction
Spokespeople for committee Republicans didn't respond to requests for comment.
Republicans are still optimistic about their chances of passing a major rewrite of the tax code.
The 20% excise tax that 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 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 12:22 ET (17:22 GMT)