House Republicans are scrambling to release their tax bill on Thursday after being forced to postpone the roll-out because of resistance from GOP lawmakers from Democratic states.
Tensions are running “very high,” said a source familiar with the 11th-hour talks. Figuring out how to pay for final changes to accommodate Republican holdouts is just one of several issues still bedeviling House Ways and Means Committee members.
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In fact, Republican tax writers could be heard speaking in raised voices during a more than two-hour meeting at the Capitol Tuesday night. Sources say there is some unhappiness among rank-and-file members who feel the plan has been written largely by party leaders without their input.
“Members on the committee feel their views are not being listened to,” the source said.
A Republican tax lobbyist said he sees less than a than 50 percent chance that the bill will be ready Thursday — though others close to Ways and Means are more bullish it will happen.
President Donald Trump might have complicated matters Wednesday when he tweeted that lawmakers should repeal the Affordable Care Act’s individual mandate, apparently as part of the tax plan.
“Wouldn’t it be great to Repeal the very unfair and unpopular individual mandate in ObamaCare and use those savings for further Tax Cuts,” the president tweeted.
The Ways and Means Committee was forced to delay its much-awaited roll-out Wednesday after a last-minute tweak to their proposal left them hundreds of billion dollars short, according to two Republican sources following the talks closely. That change, which would allow people from high-tax states to deduct their property taxes, was an effort to win over lawmakers from those states.
The tweak forced Republicans to adjust other parts of their delicately-crafted tax bill in order to find savings.
For instance, the state and local property tax change could take away money otherwise dedicated to the personal side of the tax code, like a full repeal of the estate tax or Ivanka Trump’s proposed expansion of the child care tax credit.
“In order to offer the New Jersey and the New York folks a fix, they’ve been looking for more pay-fors,” said one House Republican source close to the talks.. “It’s a very, very expensive fix.”
It’s still unclear whether the modification will win over Republicans from New York, California and New Jersey. Some of them voted against a Republican budget last week over the issue, and they’ve vowed to block a tax bill that does away with the prized deduction.
Republican Rep. Lee Zeldin, who represents the eastern end of Long Island, New York, said he met Tuesday with Vice President Mike Pence about the issue, after holding a conference call with Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn and other administration officials.
Zeldin and his colleagues from high-tax states were unhappy with the response they were getting from Ways and Means Republicans and GOP leaders. So they tried to make an end-run around them by appealing directly to the White House, sources familiar with the negotiations said.
“There really are a lot of conversations that are taking place – they’re listening to us,” Zeldin said. He called the plan to leave the deduction intact just for property taxes a positive development but said, “I don’t know if we’re there yet.”
“My position remains … that we shouldn’t be eliminating the state and local tax deduction at all,” he said.
Zeldin is unlikely to get his wish. House Republicans like Majority Leader Kevin McCarthy (R-Calif.) view the tax break as a crutch for Democratic-run states that overtax their constituents — and then turn to the federal government to subsidize them. Republicans also note that the high-tax areas are typically represented by Democrats who will have no say on the GOP plan.
Party leaders are still struggling with how to finance their plan. Brady wants to raise money by pushing people out of 401(k) accounts and into so-called Roth accounts, which tax retirement deposits when they are made rather than when they’re withdrawn.
But some fellow Republicans worry that the change would feel like a tax increase to many people. There’s also concern it would curb retirement savings because while 401(k)s are widely known, Roth accounts are much less popular.
There are also questions about another proposal to impose a new tax on both American companies that move overseas while still selling to U.S. customers, and on foreign companies operating in the U.S.. Some fear that could lead to retaliation from other countries.
There are other potential landmines, such as how to prevent wealthy people from taking advantage of the lower 25 percent tax rate Republicans want to offer unincorporated businesses.
One option — to only allow such “pbad-throughs” to claim the reduced rate on a portion of their profits, and pay ordinary income taxes on the rest — risks the wrath of the influential small business lobbying group National Federation of Independent Business. That’s because it would mean pbad-throughs would end up paying more than the advertised rate.
Lawmakers are also believed to be considering imposing a new excise tax on the endowments of private colleges, which would be sure to provoke controversy.
Despite the troubles, Senate Finance Chairman Orrin Hatch (R-Utah) brushed off House Republicans’ delay in releasing their tax overhaul legislation.
“It’s hard to do a tax bill and they’re very good at it, I have total confidence in them,” Hatch said in an interview today. “And if they need a little more time, that’s fine with me.”
Hatch said he was “not particularly” committed to rolling out a Senate bill on Nov. 8, which Sen. Bob Corker (R-Tenn.) said Tuesday was the target date.
“It could be,” Hatch said, “but it’s hard for us to do that without knowing what the House wants to do.”
Colin Wilhelm and Seung Min Kim contributed to this report.