WASHINGTON ― After months of hemming and hawing ― over debt, over procedural concerns, and over who benefits most from certain provisions ― Senate Republicans appear to be headed toward easy passage of a compromise tax bill next week, with remaining GOP holdouts folding on Friday for hardly any reason at all.
Sen. Marco Rubio (R-Fla.) endorsed the tax bill Friday afternoon after Republican leaders changed part of the legislation to meet some of Rubio’s demands, his office said.
Sen. Bob Corker (R-Tenn.), the lone Republican to vote against the Senate version of the bill earlier this month, likewise announced that he would support the final bill ― although not because he’d won any policy changes from leadership.
“I know every bill we consider is imperfect and the question becomes, Is our country better off with or without this piece of legislation?” Corker said in a statement on Friday. “I think we are better off with it.”
Having Corker and Rubio on board makes it very likely the Senate will approve the bill next week, possibly with unanimous Republican support. The biggest question marks at this point are Sen. Susan Collins (R-Maine), who wanted Obamacare subsidy concessions in an upcoming spending bill, and Sen. Jeff Flake (R-Ariz.), who wanted assurances on the Deferred Action for Childhood Arrivals immigration program. As long as there are no absences, Collins and Flake ― who both supported an earlier version of the tax legislation ― could vote no and the bill would still pass.
It’s more likely the bill will pass along party lines in the Senate with unanimous GOP support and pass the House with the same Republicans who earlier opposed the legislation over state and local tax concerns still voting no. House Majority Leader Kevin McCarthy (R-Calif.) said the lower chamber would pass the bill this coming Tuesday, leaving lawmakers little time to parse its complicated rewrite of the tax code.
The legislation would dramatically change federal tax laws and lower tax burdens, especially on corporations and wealthy individuals, at a cost of at least $1.5 trillion over 10 years ― a price tag Corker had previously deemed unacceptable but apparently can live with now.
The bill reduces tax rates but eliminates many deductions, including one that particularly benefits families with children. To make up for that, Republicans proposed a larger child tax credit with looser eligibility rules for wealthy families.
Rubio had said this week he couldn’t support the bill if it didn’t do more to benefit low-income families. Specifically, he wanted to allow poorer households to receive a bigger portion of the child tax credit as a cash refund, and he wanted the poorest working households to qualify for the refund. Many families currently don’t qualify for the child tax credit at all because their earnings are so low.
Republican leaders met Rubio halfway, increasing the credit’s refundability but not lowering the eligibility threshold.
“For far too long, Washington has ignored and left behind the American working class,” Rubiosaid in a tweet Friday. “Increasing the refundability of the Child Tax Credit from 55% to 70% is a solid step toward broader reforms which are both Pro-Growth and Pro-Worker.”
The revised provision would double the value of the credit to $2,000 and, per Rubio, allow low-income filers to receive up to $1,400 of the credit as a cash refund if the credit pushes the taxes they owe below zero. Previously, the bill would allow refunds up to $1,100, with the amount indexed for inflation annually.
But Republican leaders did not give in to Rubio’s demand to further reduce the eligibility threshold. Currently, parents can receive a child tax credit refund only up to 15 percent of their income above their first $3,000 of earnings. The Senate bill would lower the threshold to $2,500. Rubio wanted to eliminate the earnings threshold.
“The poorest 10 million kids who were left out get nothing from this ‘deal,’” Jacob Leibenluft, a senior adviser with the liberal Center on Budget and Policy Priorities,tweeted on Friday.
Rubio had previously pushed to offset the cost of increasing child tax credit refundability with a slightly higher corporate tax rate. Republicans will apparently pay for it by maintaining the current cutoff of the benefit for children older than 17, rather than increasing it to age 18 as the Senate bill would have.
Overall, the legislation would lower individual income tax rates across seven tax brackets, with a top rate of 37 percent ― down from 39.6 percent ― that kicks in at income above $600,000 for married couples and above $500,000 for individuals. The other tax rates are as follows:
For joint filers:
For single filers:
The legislation wouldalmost double the standard deduction, from $6,350 to $12,000 for individual filers and from $12,700 to $24,000 for married couples, making it more likely that people will choose it rather than the more complicated itemizing of deductions.
All along, GOP lawmakers have said they wanted to simplify the tax code. They would do that, they said, by collapsing tax brackets and eliminating smaller deductions while doubling the standard deduction. But in the end, Republicans kept the same number of brackets and retained a number of those smaller deductions that lawmakers had initially targeted for the waste bin.
The deductions that were saved include those for medical expenses and charitable contributions, a write-off for graduate students that exempts the value of reduced tuition from their taxes, the mortgage interest deduction for home loans taken out before the new year and a teacher expenses deduction of $500. Republicans hope that retaining those write-offs will make the bill more politically popular, but it also makes the legislation ― and doing your taxes ― more complicated.
Asked about the GOP promise that you’d be able to do your taxes on a postcard, Ways and Means Chairman Kevin Brady (R-Texas) told reporters on Friday night that Republicans were still making good on that. “Are there a few more items on it? Sure,” Brady conceded.
The bill won’t be a tax cut for everyone, however. Some of the deductions eliminated could mean higher taxes for certain Americans. Most notably, the legislation would end the state and local tax deduction, but other provisions would allow people to deduct up to $10,000 of their local levies, either sales, income or property taxes ― your choice. That would soften the blow for people in many congressional districts, although taxes would still rise for a number of homeowners in high-tax states like New Jersey, New York and California.
The penalty for not obtaining health insurance, the Affordable Care Act’s much-disliked individual mandate, would also be repealed beginning in 2019.
While some of the bill’s other changes would likewise be delayed, most would kick in on Jan. 1, 2018, meaning taxpayers could feel some of the effects next year, but would largely have to wait until tax filing season in early 2019 to truly determine how they made out. That would push the issue a little further from the minds of voters during the 2018 midterm elections.
But Republicans are also counting on an even stronger economy as a result of these tax cuts, mostly due to the reductions in the corporate rate, which drops from 35 percent to 21 percent.
GOP lawmakers had planned on a corporate rate of 20 percent, but settled on 21 percent as a compromise to pay for other items in the bill, including to make sure that the corporate cuts were permanent and immediate. (The individual rate reductions, on the other hand, would expire in 2025, meaning people could face higher taxes if Congress didn’t renew the cuts.)
Although Republicans insist an improved economy will help pay for the cost of these tax changes, they haven’t produced a single credible economic analysis that says this bill will pay for itself ― or end up raising revenue for the government, as Treasury Secretary Steve Mnuchin famously claimed.
Simply put, the GOP legislation is a set of tax cuts that will be paid for with future spending cuts or the addition of more debt. It’s likely to be some combination of the two, with Republicans who spent years bemoaning the national debt suddenly not concerned that their tax policies will add to that burden.
This article originally appeared on HuffPost.