There are significant differences between the House and Senate versions of the tax overhaul. Unlike the House, Senate Republicans cannot afford to lose more than two votes. Also unlike the House, the Senate has budget rules that must be met. Will the differences be resolved in reconciliation?
The Wall Street Journal reports Senate Tax Plan Differs From House on Individual Rates, Timing of Corporate Rate Cut.
Two Votes to Spare
With only a 52-48 majority Republicans can afford to lose at most two votes in the Senate. In that case Vice President Mike Pence would break a tie.
The House added to budget negotiation difficulties by bumping up taxes on multinational corporations and exempting car dealers from a limit on interest deductions.
Exempting car payment interest? Really? What on earth for?
Greg Valliere, chief global strategist at Horizon Investments accurately sums up the situation: “There isn’t enough money to pay for everything that each house wants. Something has to give, most likely corporate tax relief, which may not be as generous as proponents expected a few weeks ago.”
Byrd Rule
The Senate must abide by the Byrd Rule. That’s a requirement that the overhaul cannot increase deficits beyond the first 10 years.
Of course, no one can accurately predict such things in the first place. Nonetheless, if the non-partisan Congressional Budget Office makes that determination, the bill requires 60 votes to pass.
And right now we can say House Bill Does Not Meet the Byrd Rule.
The Tax Cuts and Jobs Act will add $155 billion to the deficit in 2028, the year after the 10-year budget window ends in 2027.
One dramatic option for making the tax bill Byrd-compliant would be to let some portion of the corporate and individual tax cuts sunset and expire after 10 years.
Allowing the corporate rate to sunset would not be an attractive option for Republican lawmakers. CRFB notes that some conservative leaning think tanks have said doing so would undermine business investment, and potentially be more anti-growth than no cut to the corporate rate.
Making individual tax cuts temporary, as was done under the Bush administration, would also be politically perilous, as it would amount to a tax increase for households in the foreseeable future.
