Senate Readies for Budget Vote Amid Talk of Bipartisanship

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By Laura Davison, Kaustuv Basu, and Colleen Murphy (Bloomberg BNA)

Democrats readied a series of amendments to the budget resolution that would preserve the state and local tax deduction, prevent tax cuts for wealthy individuals, and prohibit tax cuts from adding to the deficit.

The Senate is expected to vote on the bulk of the amendments on Oct. 19 with a final vote expected early the next day. Republicans plan to use the budget resolution to pass a tax reform bill in Congress without the help of the Democrats in the Senate. House Ways and Means Committee Chairman Kevin Brady (R-Texas) has said that he will unveil a tax reform bill once a final budget resolution is agreed to in Congress.

The looming Senate vote on the budget came even as a bipartisan group of Senate Finance Committee members, including several Democrats in states won by President Donald Trump who are up for reelection in 2018, met with the president at the White House on Oct. 18 to discuss a tax reform bill.

Trump voiced interest in a bipartisan bill, several senators said. Sen. Orrin G. Hatch (R-Utah) said that a tax markup won’t be everything Democrats want, but it won’t be just GOP priorities, either. Democrats appeared to be more circumspect, but some remained hopeful that a tax bill would have some elements of bipartisanship.

A ‘Constructive’ Meeting

Sen. Debbie Stabenow (D-Mich.) called the meeting “constructive,” while Sen. Claire McCaskill (D-Mo.) called it “interesting.”

A news release from Stabenow’s office later said she expressed concerns that the Republican tax proposal would give most of the benefits to the wealthiest and “take away important tax incentives for Michigan manufacturers and small businesses, and add to our nation’s deficit.”

Sen. Sherrod Brown (D-Ohio) said he was pleased with the meeting. Brown said he talked to the president about two of his bills—the Patriot Employer Tax Credit Act (S. 1778), which would provide a tax credit to certain companies that invest in the U.S., and the Working Families Tax Relief Act of 2017 (S. 1371), which would expand the earned income tax credit while strengthening the child tax credit.

“I heard him say he likes those ideas. I gave him copies of those two bills. I’m hopeful that’s included in the tax package,” Brown said. He added that Hatch and Senate Majority Leader Mitch McConnell (R-Ky.) might not embrace those ideas. The president didn’t back off from the idea of repealing the estate tax, he said.

Other senators at the meeting said that Trump was focused on a middle-class tax cut. But U.S. Treasury Secretary Steven Mnuchin said in an interview with Politico published Oct. 18 that the Republican tax plan will include breaks for the wealthy, a rhetorical reversal that contradicted Trump’s promises that the rich won’t enjoy a net tax cut.

Getting to a Bipartisan Bill

Sen. John Thune (R-S.D) said to realize a bipartisan deal, Democrats will have to agree to allow for the bill to be dynamically scored, so that the revenue impact includes economic growth resulting from the bill. Forty-five of the Senate’s 48 Democrats signed a letter earlier this year saying they wouldn’t back a bill that relies on dynamic scoring.

“To get the rates down to where we think they need to go we are going to assume a small amount of dynamic scoring. I think it is a reasonable amount,” he told reporters. “Walking out, I heard one Democrat say there is some flexibility on that depending on what the other components of the bill are. We’ll see if they are sincere about that.”

Sen. John Cornyn (R-Texas) said that although Democratic senators are talking about bipartisanship, “the proof is in the action.” Cornyn told reporters that Trump suggested a bipartisan tax working group at the meeting. But he appeared skeptical about what benefits it could bring.

Senate Democrats have long complained that the use of a fast-track budget process called reconciliation doesn’t exactly signal that Republicans are ready to embrace bipartisanship.

Senate Finance Committee ranking member Ron Wyden (D-Ore.) said in a statement after the meeting that there was a “chasm between the rhetoric and reality of the Trump tax plan.” “All the happy talk about helping the middle class and avoiding a giveaway to the wealthy sounds great, but it is not what the White House and Republicans have on offer,” Wyden said. He called the GOP tax plan a “con job on the middle-class.”

Budget Action

That budget process was gearing up in the Senate Oct. 18, with Sen. Maria Cantwell (D-Wash.) offering an amendment that says a budget provision repealing or limiting the SALT deduction would require 60 votes instead of a simple majority. The tax break has been a sticking point in House negotiations. Republicans from high-tax states are seeking a compromise that would preserve some of the deduction’s benefits.

Many of the Democratic amendments are likely to fail, but offering them will force Republicans to vote for politically unpopular positions, such as granting tax cuts to high earners or cutting Medicare and Medicaid.

The Senate voted Oct. 18 to pass two Republican budget amendments that would direct tax writers to prevent wealthy individuals from gaming a preferential rate for passthroughs and expand the child tax credit.

An amendment offered by Sen. Susan Collins (R-Maine) directs the Finance Committee to provide tax relief to small businesses and include provisions to prevent upper-income taxpayers from sheltering income from taxation. It passed via voice vote, a streamlined process for provisions with wide support.

Republicans have called for lowering the top tax rate for passthrough business income to 25 percent from 39.6 percent, raising concerns that sophisticated taxpayers could over-report their business profits and under-report their compensation to lower their tax bills.

An amendment from Sen. Dean Heller (R-Nev.) directs the committee to provide tax relief to American families with children. The Republican tax framework, as well as many Democrats, support expanding the child tax credit. It passed 98-0.

The amendments signal bipartisan support for a tax bill to put guardrails on passthrough income and expand the child tax credit, but the amendments aren’t binding because they don’t directly instruct the Finance Committee to adjust revenues, the deficit, or spending by a specific amount.

The Senate rejected amendments from Sens. Bernard Sanders (I-Vt.) and Bill Nelson (D-Fla.) that would provide funds to Medicaid and Medicare by reducing tax breaks for wealthy individuals and specific industries. Another Sanders amendment, which also failed, would have instructed the committee to not cut taxes for the top 1 percent of earners.

With assistance from Cheryl Bolen and Nancy Ognanovich (Bloomberg BNA); Sahil Kapur, Erik Wasson, Jack Fitzpatrick, and Arit John (Bloomberg)

To contact the reporters on this story: Laura Davison in Washington at ldavison@bna.com; Kaustuv Basu in Washington at kbasu@bna.com; Colleen Murphy in Washington at cmurphy@bna.com (Bloomberg BNA)

To contact the editors responsible for this story: Meg Shreve at mshreve@bna.com (Bloomberg BNA); John Voskuhl at jvoskuhl@bloomberg.net, Alexis Leondis at aleondis@bloomberg.net (Bloomberg)

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