The tax overhaul conference report looks a lot like the Senate bill. Senate negotiators prevailed on most of the major issues — and House Republicans say they’re fine with that.
House Republicans interviewed for this story said they will support the final product despite it being very different from the one they voted on in November, with reasons ranging from specific provisions they championed to the overall benefits of the sweeping package.
Perhaps their main reason was one they didn’t cite: They want to get the tax bill done because they feel like they need the legislative win. It would be arguably the biggest one for the GOP in its first year of controlling Congress and the White House since 2006, and possibly the only major policy promise they follow through on in the 115th Congress.
When asked about the litany of Senate priorities that made it into the conference report, House Ways and Means Chairman Kevin Brady cited some concessions the House won.
“Start with the top rate, which was a key priority for SALT lawmakers going in,” the Texas Republican said of the final bill lowering the top individual rate to 37 percent.
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Keeping the state and local tax, or SALT, deduction for property and income or sales taxes capped at $10,000 was a priority for House lawmakers as well, Brady added.
“Accelerating the business tax rates and cuts to occur now is a major part of our House bill,” he said. “And up and down we just tried to blend the two areas. Yeah, I think the House and Senate both brought good ideas to the table, and we just picked the best to make that work.”
Speaker Paul D. Ryan used similar language to describe the conference report. “The conference committee took the best ideas from the House and Senate plans and made an even better bill,” he said in a statement.
The Senate prevailed on a majority of the major issues, including:
- Broadening the exemptions for the estate and the individual alternative minimum tax instead of fully repealing them
- Not repealing the so-called Johnson amendment that prohibits churches organized as 501(c)(3)s from making political statements without jeopardizing their tax-exempt status
- Retaining seven individual tax brackets instead of simplifying to three
- Letting most of the individual tax cuts expire after eight years
- Boosting the refundability of the child tax credit
- Using a deduction to provide relief for pass-through businesses rather than special rates
“The structure is a little closer to the Senate version because we kept our provisions for these smaller companies, for these pass-throughs, which was viewed as simpler,” Sen. Rob Portman, one of the conferees, said. One of the reasons for that is “the fact that we had two or three more weeks to work on it and to see some of the reaction to the House bill,” the Ohio Republican added.
The final bill also includes other aspects of the Senate bill that were not in the House version — like repeal of the tax penalty associated with the individual mandate to purchase health insurance, retaining the medical expense deduction and student loan interest deductions and the tax preference for private activity bonds — that many House Republicans wanted.
There are some true compromise provisions, such as the $750,000 limit on the mortgage interest deduction, which is halfway between the $1 million current law limit the Senate retained and the $500,000 limit the House proposed.
Still, if one had to choose a winner between the two chambers, it would clearly be the Senate.
The lack of complaints about that from House Republicans is somewhat surprising given how often they bemoan the Senate jamming or rolling the House on legislative issues.
Many of their regular grievances surround spending and other perennial issues and stem from the fact that most legislation that advances through the Senate needs to be bipartisan because of a 60-vote threshold to cut off debate.
Senate Republicans have a 52-seat majority that will fall to 51 once Alabama Democratic Sen.-elect Doug Jones is sworn in.
The tax overhaul provided House Republicans with a unique opportunity to face off with their own party in the Senate. Because the tax bill is moving through the budget reconciliation process, it requires only a simple majority for passage, meaning Senate Democrats’ votes are not needed.
Yet House Republicans appeared to go quietly. That may be because the conferees participating in the negotiations are leadership allies who don’t publicly complain about the Senate as much as some of their colleagues.
A speedy timeline and narrow vote margin were also factors. Lawmakers have been working to get a bill to the president’s desk before Christmas, and Senate Republicans can lose a maximum of two votes, compared to the 22 that House Republicans can lose.
Rep. Chris Collins said he always knew the final bill would track the Senate version. He expected the split to be 90 percent Senate provisions and 10 percent House.
“The Senate bill fixed a lot of Republican problems that could have hurt us in the midterms,” the New York Republican said.
Retaining the “popular deductions” for medical expenses and student loan interest, as the Senate bill did but the House did not, drew praise from Rep. Ryan A. Costello.
The Pennsylvania Republican said he also likes how the conference report handles pass-through deductions.
“It was better constructed, with all due respect to the House,” he said.
Red lines fade
Among the most surprising supporters of the conference report are House Freedom Caucus members, who for months spoke of six “red lines” on the tax bill they said they weren’t willing to cross. The final bill crosses half of them.
The Freedom Caucus wanted full repeal of the estate tax; the conference went with the Senate provision doubling the exemption, which, like other individual provisions, expires after eight years.
They said the corporate rate should be no more than 20 percent; it’s 21 percent in the final bill.
They called for a bifurcated repatriation rate with cash assets being taxed around 10 percent and non-cash assets at a lower rate; the conference report raises the rates higher than they were in both bills to 15.5 percent for cash assets and 8 percent for non-cash assets.
Freedom Caucus Chairman Mark Meadows said he is willing to go up to 21 percent on the corporate rate because it starts right away, unlike in the Senate bill, and because the final measure lowers the top individual rate, which he thought was important.
“If I can give a point to get those two things, I see that as a win,” the North Carolina Republican said, noting that those two issues, along with the changes to the pass-through provisions, were important to many of his caucus members.
Tradeoffs like that, a negative for a positive, are fine so long as the overall result is pro-growth, Freedom Caucus member Dave Brat said. He believes the growth benefits of the pass-through changes will effectively offset the growth limitations of the higher corporate rate.
“It’s a bunch of moving parts that are limited by $1.5 trillion,” the Virginia Republican said, referring to the maximum amount the bill can cost according to the budget reconciliation instructions.
Brat said he would be ringing the alarm if he saw something egregious in the tradeoffs, but he hasn’t.
“Just bunch of good pieces you’ve got to move around on the chess board,” he said.
To use a tax overhaul cliché, there are always going to be winners and losers. In this case, House Republicans don’t mind being the losers for what they see as a bigger win.
As Costello said: “I don’t walk away feeling offended.”