House Advances New Tax-Cut Bill, But Senate Has No Plans to Act

(Bloomberg) -- Republicans have had a hard time getting their tax-cut message to resonate over the past year. Friday was no different.

The House passed legislation that would make permanent the 2017 tax cuts for individuals and pass-through businesses which otherwise would expire at the end of 2025.

The bill passed 220-191, mostly along party lines. The legislation can now advance to consideration in the Senate, though it likely won’t be taken up anytime soon. Republican leaders are hesitant to take up a bill they don’t expect could garner the 60 votes needed to pass. Plus, Republicans senators have higher priorities at the moment.

Debate over confirming President Donald Trump’s Supreme Court nominee Brett Kavanaugh dominated the discussions within Congress this week. Kavanaugh testified Thursday about allegations of sexual assault while in high school. His accuser, Christine Blasey Ford, also testified in front of the Senate Judiciary Committee. Two other women have accused Kavanaugh of sexual misconduct.

Senate Republicans’ top goal is to confirm the nominee before the Nov. 6 elections.

Hasn’t Sunk In

Representative Kenny Marchant, a Texas Republican, said he’s talking about the tax cuts on the campaign trail, but voters aren’t necessarily making a connection between the tax law Congress passed in late 2017 and the growing economy.

“Once people file their tax returns next year, I think it is all going to sink in on them,” he said. “For corporations, it’s already sunk in.”

The “Tax Reform 2.0” legislation isn’t what House Republicans had hoped it would be. The bill was an attempt to freshen up their premier legislative achievement ahead of the midterm elections and use it against Democrats. It was always seen as a political exercise, since it has no real prospects of becoming law.

The effort faced opposition from a small but vocal faction of Republican lawmakers opposed to limiting the deduction for state and local taxes at $10,000, who see their political survival at risk in November.

‘Cheap Shot’

“This bill is going nowhere and they know it,” Representative Peter King, a New York Republican opposed to the cap on the so-called SALT deduction, said his party’s House leadership. “It’s politically bad. It’s a cheap shot at places like New York and New Jersey.”

No Democrats supported last year’s tax bill, and they’ve been critical of the second round of tax cuts since they were first discussed by Republicans.

The positive messaging Republicans wanted to develop around the tax law has repeatedly been drowned out by White House controversies and political fights. Immigration policies that separate parents and children who’ve illegally crossed the U.S.-Mexican border, and an escalating trade war against China and other U.S. trading partners, clouded a planned six-month celebration of the tax law passage this summer. Earlier, indictments and guilty pleas in Special Counsel Robert Mueller’s investigation into the 2016 election and Trump campaign competed with the roll-out of the legislation.

Republicans have been motivated to vote in the mid-terms, although recent surveys have shown their level of interest starting to pick up.

Tax Law Polls

The followup legislation would make permanent many provisions of the 2017 law affecting individuals and pass-through businesses, such as partnerships, including lower individual income tax rates, an expanded standard deduction, and a 20 percent deduction for pass-through companies.

House Republicans generally support extending the tax cuts, even though voters aren’t sold on the changes. Most polls show fewer than 40 percent of voters support Trump’s tax law, and an internal Republican National Committee survey obtained by Bloomberg News shows that people overwhelmingly think the law benefits corporations and the wealthy over the middle class.

House Ways and Means Committee Chairman Kevin Brady said after the vote that he was encouraged by at least minimal Democratic support for the bill. Three Democrats voted yes, against 181 who voted no. The Texas Republican said he’s confident some aspects of his tax priorities will advance in the Senate.

Two other tax bills, one expanding some retirement savings benefits and another to allow startup companies to deduct more of their costs and raise capital with fewer rules, passed the House on Thursday. The retirement bill is substantially similar to one backed by the top Democrat and Republican on the Senate Finance Committee -- Ron Wyden of Oregon and Orrin Hatch of Utah -- and could be up for a vote in the Senate before the end of the year.

©2018 Bloomberg L.P.