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Picture This: A ‘Perfecto’ Final Tax Bill

As House, Senate negotiate, president raises expectations

Sen. John Cornyn, R-Texas, speaks with reporters about the GOP tax bill between votes in the Capitol on Nov. 30. (Bill Clark/CQ Roll Call)
Sen. John Cornyn, R-Texas, speaks with reporters about the GOP tax bill between votes in the Capitol on Nov. 30. (Bill Clark/CQ Roll Call)

The House and Senate are not even in formal conference negotiations on a tax overhaul measure yet, but the expectation from the White House is clear: It’s got to be “perfecto.”

On a day of increasing uncertainty over how to fund the government past Dec. 8, President Donald Trump hosted a small group of Senate Republicans at the White House and placed his marker. 

Americans will “be making so much money you are not going to know what to do with it,” Trump said Tuesday, adding that “I think we’re going to make it so that it comes out very beautifully.”

After the Senate passed its measure on Saturday, 51-49, GOP leaders and the White House had a choice, Trump explained: put the Senate bill up for a vote on the House floor, or “put it into the conference and let’s come out with something where everything is perfecto.”

They chose “perfecto,” he said as GOP senators, seated around a rectangular table in the Roosevelt Room, looked on.

But getting to perfecto is easier said than done, particularly when issues like the alternative minimum tax, pass-through companies, the individual mandate to purchase health insurance and drilling in the Arctic National Wildlife Refuge are added to the mix.

At a minimum …

For instance, repealing the AMT is a priority for House Republicans in conference negotiations with Senate tax writers, Ways and Means Chairman Kevin Brady said.

The Texas Republican said he has spoken to many House Republicans who “feel strongly” about permanently repealing the AMT for corporations and individual taxpayers. The House-passed tax bill would do so, while the Senate measure would keep the current corporate AMT and expand exemptions for the individual AMT rather than repeal it.

“Both of them are very costly and they add complexity,” Brady said Tuesday. The individual alternative minimum tax particularly affects families in high-tax states and the corporate AMT “undermines some of the pro-growth provisions that we kept in the tax code,” including the tax credit for research and development, he said.

Watch: Who’s Getting to Write the Tax Bill

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Meanwhile, Brady said there were “strengths” in each chamber’s proposed structure for taxing pass-through business income.

“Right now we’re looking at how we can really improve on both structures, especially making sure pass-throughs that make a lot of capital investment in their business can achieve the lowest possible pass-through rate that we can deliver,” he said.

On deductions for state and local taxes, Brady said possible changes are still on the table. Both the House and Senate tax plans would allow up to $10,000 in property taxes to be deducted, but that provision could be tweaked in conference to further address concerns of Republicans from high-tax states such as New York, New Jersey and California.

He said making such a change could be costly in terms of revenue. “It’s got a pretty big figure to it. But all of this stuff interacts with each other,” he said.

What’s my mandate?

On another sticky matter, Brady, who is leading House conferees in negotiations, thinks his GOP colleagues will accept the Senate tax measure’s rollback of the individual mandate to purchase health insurance, a possible flash point for some moderate Republicans.

“We’ll be asking our members where do they want us to be on that position,” the Texas Republican said. “I suspect there will be strong support, but we’re listening.”

The provision wasn’t in a House-passed measure, but it was in an overhaul of the health law that House Republicans passed earlier this year.

The health care bill passed the House narrowly, with just one GOP vote to spare and a chunk of moderate House Republicans voting against it. Only five moderate Republicans voted against both that bill and the tax measure, opening up a question of whether more moderates could vote against a final tax bill that includes the requirement typically considered a key part of the 2010 health care law signed by President Barack Obama.

Republican Reps. Ryan A. Costello of Pennsylvania and Barbara Comstock of Virginia, who voted against the health care bill in May, both said they have not taken firm positions on the repeal of the mandate in the tax bill.

“I do hear from people who, the mandate costs them money, and they’d like some more flexibility,” Comstock said, noting she has other concerns about the tax bill, including changes to the state and local tax deduction. “You have the Alexander-Murray bill, so a lot of moving pieces right now.”

The Alexander-Murray legislation is one of two health care measures that Senate Majority Leader Mitch McConnell assured Maine Sen. Susan Collins would be attached to must-pass legislation this year.

That promise helped earn her vote for the tax bill. The Alexander-Murray bill would, among other things, fund the law’s cost-sharing reduction subsidies for the next two years. Another bill, by Collins and Democratic Sen. Bill Nelson of Florida, would provide funding for two years for states to set up reinsurance programs that help pay for high-cost patients.

But House Republicans appear opposed to providing funds for the health care law through those two measures.

“That’s just not going to happen,” Republican Rep. Tom Cole of Oklahoma said Tuesday. 

Brady told reporters he didn’t know much about the commitment that was made across the Capitol.

“Leadership is sort of working through that issue while we’re focused on conference,” he said.

House Speaker Paul D. Ryan has said he would prefer to roll back the health care law entirely.

“We’re going to have continued discussions with our members here in the House and across the aisle about the best way forward,” he said Tuesday at a press conference. “We think health care is deteriorating. We think premiums are going up through the roof, insurers are pulling out, and that’s not a status quo that we can live with.”

But Sen. John Cornyn, the majority whip, urged the House to heed the compromises that were part of the Senate bill passage. If agreements that were made with certain senators aren’t kept, that could derail passage of a tax bill in the Senate, he warned.

“As we head into a conference with the House of Representatives, the focus has to be on how we can maintain support here in the Senate,” the Texas Republican said Tuesday on the Senate floor. “We’ve got to continue to communicate and work together with each other. We can’t undermine our own victory.”

Drilling down

House conferees do appear to be on board with another contentious issue in the Senate bill, allowing oil and gas drilling in the Arctic National Wildlife Refuge in Alaska.

“I’ve been asking for ANWR for a long, long time, and so have most rational people, so I expect it to be part of the final product,” said House Natural Resources Chairman Rob Bishop of Utah, who was named a conferee Monday night.

If so, that means efforts to strike the measure from the bill will likely fall short, as the broader tax conversation carries more weight for Republicans than sustaining the drilling ban in the refuge.

“There’s always been, frankly, more support in the House than the Senate for it … and so I would anticipate that it would stay in, and especially for a long term for Alaska,” said Energy and Commerce Chairman Greg Walden of Oregon.

Timing for the Senate to vote on going to conference is still up in the air, with consideration possible as early as Wednesday. 

Most of the actual negotiating is expected to take place outside the formal confines of a conference committee. Aside from the need to resolve the questions possessing the Capitol about how to fund the government and for how long, Republican leaders are optimistic they can resolve any differences and send a bill to Trump for his signature before Christmas. 

Whether it will be “perfecto”?

That could hinge on questions about the AMT, or the health insurance mandate, or something else that could pop up. 

Ryan McCrimmon, Mary Ellen McIntire and Jeremy Dillon contributed to this report

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