Trump’s Tax Views Differ From House’s: Sen. Manchin

For over 50 years, Bloomberg Tax’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

By Colleen Murphy, Laura Davison, and Kaustuv Basu

President Donald Trump disagrees with House Republicans on some aspects of the tax bill, Sen. Joe Manchin (D-W.Va.) said after talking with the president and fellow Senate Democrats.

“I don’t think that’s the president’s bill,” Manchin said about the House GOP tax bill (H.R. 1).

Manchin was among about a dozen Senate Democrats who met with White House economic adviser Gary Cohn Nov. 7 to talk about the possibility of a bipartisan tax bill. Trump called into the meeting for about 15 minutes, people in the room said.

Sen. Sherrod Brown (D-Ohio) said he again brought up two bills that the president praised during a meeting a few weeks ago. One, the Working Families Tax Relief Act (S. 1371), would expand access to and increase the value of the earned income tax credit and the child tax credit. The other, the Patriot Employer Tax Credit Act (S. 1778), would provide a tax credit to certain companies that invest in the U.S.

“If you really want to do this in a bipartisan manner, you’ll get 70 votes; this won’t just be get 50 and have the vice president come in,” said Sen. Joe Donnelly (D-Ind.), who also attended the meeting. “This would really be reflective of America.”

The Senate Finance Committee may release a tax bill as soon as Nov. 9, but senators have been mum so far about how the bill will differ from the House’s—and how those differences represent crucial tough decisions. Democrats say they haven’t been consulted on the process, which will make it hard to earn their votes.

Though the Finance Committee could mark up the bill next week, Brown said rushing a bill through could undermine its credibility. The contents of the Senate bill have been kept under wraps as the House marks up its version of the bill this week.

For example, Sen. Patrick J. Toomey (R-Pa.), a committee member, declined to tell reporters Nov. 7 if he expected to keep the 39.6 percent tax bracket on high earners in the Senate bill. Instead, he said only the committee “has a very good shot” at releasing a bill on Nov. 9.

The House Ways and Means Committee is slated to approve its bill by Nov. 9, following a four-day markup. It is widely expected that the Senate bill will differ substantially from the House bill and will be a moderating force in negotiations as the two chambers try to reconcile discrepancies. Possible areas for disagreement include the treatment of multinational companies, repeal of the estate tax, and the rules for calculating passthrough income.

Meanwhile, House Republicans shrugged off the potential complications that could arise if the Senate releases a dramatically different bill.

“What happens if the Senate doesn’t agree on this? We will fight the Senate,” Rep. Peter Roskam (R-Ill.), chairman of the Ways and Means Tax Policy Subcommittee, said during the panel’s markup Nov. 7.

Small Business Concerns

Sen. Heidi Heitkamp (D-N.D.), whose support the Trump administration has been seeking on tax reform, has been critical of the House bill thus far and said she needs to wait and see “what those differences are” between the House legislation and what the Senate releases.

Tax treatment of individuals and small businesses is more of a priority than a corporate tax cut for individuals in North Dakota, she said.

“I will wait and see. I don’t presuppose anything until I see it,” she told reporters.

The treatment of partnerships, limited liability companies, and S corporations in the tax bill has generated concern in the business community. The National Federation of Independent Business has said the House bill doesn’t do enough to relieve the tax burden on small businesses.

Business groups and lobbyists are looking to the Senate to fix concerns with how the bill treats passthroughs. Senators from states with few corporate headquarters, including Sens. Charles E. Grassley (R-Iowa) and John Thune (R-S.D.), are concerned about creating a level playing field between small and large companies.

A person familiar with Senate talks previously told Bloomberg that tax writers in that chamber are planning to keep the mortgage interest deduction limit at $1 million in their version of a tax bill, in contrast with the House’s plans.

Individual Mandate Debate

Sen. Ted Cruz (R-Texas) told reporters Nov. 7 he hopes to repeal the Affordable Care Act’s individual mandate in the Senate bill, a move that likely won’t be part of the House bill. Doing so brings in valuable revenue, he said.

“The beauty of repealing the individual mandate is number one, you will eliminate an IRS penalty that is falling on six and a half million Americans who are predominantly middle- and lower-income. So it is immediate relief on those six and a half million Americans,” he said. “Also, it allows you to lower rates for everyone.”

Some moderate Republicans are opposed to the idea due to concern it would conflate health care issues with tax reform.

“I think it would be a terrible mistake to include the individual mandate in a tax reform bill,” Rep. Charlie Dent (R-Pa.) told reporters.

Rep. Mark Meadows (R-N.C.) said he has been talking to several senators about the tax reform bill.

The individual mandate is a $400 billion pay-for, Meadows said, but it likely won’t be added on the House side. The revenue rules, which allow for the tax bill to lose $1.5 trillion within the decade-long budget window, will be a big hurdle in the Senate, he said.

Meadows predicted that the decision on including the individual mandate repeal will be the biggest issue the House and Senate will have to resolve in a conference committee.

Other issues that have been sticking points in the House, such as a compromise over the state and local tax deduction, won’t be hotly contested because the Senate bill could call for an outright repeal of the tax break. There aren’t any Republican senators from the high-tax states—New York, New Jersey, and California—most directly affected by the provision.

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

To contact the editor responsible for this story: Meg Shreve at mshreve@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Daily Tax Report®