By Thomas Kaplan and Alan Rappeport
WASHINGTON – Republicans took a critical step toward notching their first significant legislative victory since assuming full political control, as the House and Senate voted along party lines Tuesday and into early Wednesday to pass the most sweeping rewrite of the tax code in decades.
The $1.5 trillion tax bill, which is expected to head to President Trump’s desk in the coming days, will have broad effects on the economy, making deep and lasting cuts to corporate taxes as well as temporarily lowering individual taxes.
The endeavor was not without hiccups, however, as three small provisions in the final tax bill agreed to by the House and Senate were found by the Senate parliamentarian to violate the budget rules that Republicans must follow to pass their bill through a process that shields it from a Democratic filibuster. As a result, the bill changed slightly in the Senate, and the House will need to vote on it again since both chambers must approve identical legislation. Among the items that were deemed out of order was the title of the bill: the Tax Cuts and Jobs Act.
The approval of the bill in the House and Senate came over the strenuous objections of Democrats, who have accused Republicans of giving a gift to corporations and the wealthy and driving up the federal debt in the process.
As the final vote approached in the Senate, Chuck Schumer of New York, the Democratic leader, gave his closing argument against the bill and scolded his Republican colleagues for talking during his remarks on the floor.
“This is serious stuff,” Schumer said. “We believe you’re messing up America. You could pay attention for a couple of minutes.”
Rep. Nancy Pelosi of California, the House Democratic leader, called the tax bill a scam, saying it “is simply theft – monumental, brazen theft from the American middle class and from every person who aspires to reach it.”
On Tuesday afternoon, the House voted 227-203 to pass the bill, with 12 Republicans voting against it and no Democrats voting for it. Eleven of the 12 Republicans were from California, New Jersey and New York, states that would be hit hard by a provision in the bill limiting the deduction for state and local taxes to just $10,000. The Senate approved the bill early Wednesday.
The Senate voted 51-48, with no Republican defections and no Democratic support.
Under the final tax bill, the corporate tax rate would fall to 21 percent, from the current 35 percent, a move that Republicans are betting will increase economic growth, create jobs and raise wages. Individuals would also see tax cuts, including a top rate of 37 percent, down from 39.6 percent. The size of inheritances shielded from estate taxation would double, to $22 million for married couples, and owners of pass-through businesses, whose profits are taxed through the individual code, would be able to deduct 20 percent of their business income.
But the individual tax cuts would expire after 2025, a step that Republicans took to comply with budget rules, which do not allow the package to add to the deficit after a decade.
The tax changes will affect businesses and individuals unevenly, with winners and losers often being determined by industry or geography.
An analysis by the Tax Policy Center found that the bill would reduce taxes, on average, by about $1,600 in 2018, increasing after-tax incomes 2.2 percent, with the largest benefit going to the wealthiest households.
The reach of the bill extends beyond taxes. It strikes at a core component of the Affordable Care Act, eliminating the requirement that most people have health coverage or pay a penalty, a move that the Congressional Budget Office projects will increase premiums for people who buy insurance. It also would open the Arctic National Wildlife Refuge in Alaska to oil and gas drilling, a defeat for environmentalists who have fought against such action for decades.
The last-minute parliamentary stumble involved three small components of the bill, according to Senate Democrats, including a provision that would have allowed the use of 529 savings accounts for home-schooling expenses and part of the criteria to be used to determine whether colleges and universities are subject to an excise tax imposed on their investment income. The parliamentarian even ruled against the bill’s name, the Tax Cuts and Jobs Act, since the provision creating the name did not influence spending or revenue, as each provision must under Senate budget rules.
The chief tax writer in the House, Rep. Kevin Brady, R-Texas, the chairman of the Ways and Means Committee, was unruffled.
“Our belief is, ‘So what?’” Brady said on Fox News. “If we can get to vote twice on cutting taxes for families and small businesses, glad to do it.”
Republicans in Congress moved with remarkable speed in their bid to enact the biggest tax overhaul since 1986, unveiling legislation to rewrite the tax code, marshaling support for their effort and devising a compromise between the House and Senate in under two months.
The success within reach would be a stark contrast with their attempt this year to repeal and replace the Affordable Care Act, a quest that was encumbered by internal divisions among Republicans and ultimately ended in humiliating failure.
“People wanted to get it done,” Sen. John Cornyn of Texas, the No. 2 Senate Republican, said of the tax rewrite. “That’s the single biggest difference.”
It would also give Trump a signature accomplishment as the first year of his presidency nears an end. After the House vote, Trump took to Twitter to congratulate House Republican leaders as well as “all great House Republicans who voted in favor of cutting your taxes!”
Shortly after 1 a.m. Wednesday, Trump acknowledged the Senate’s vote in a tweet: “The United States Senate just passed the biggest in history Tax Cut and Reform Bill. Terrible Individual Mandate (ObamaCare)Repealed.”
In recent days, critics of the tax bill have argued that it will enrich a number of Republican lawmakers who supported it. They pointed specifically to Sen. Bob Corker of Tennessee and Trump himself, who both hold real estate investments that will get favorable tax treatment through the legislation.
The White House press secretary, Sarah Huckabee Sanders, pushed back on the notion that Trump would save money as a result of the tax plan. “I know that there are a number of provisions that would negatively impact the president personally,” Sanders said.
At the Capitol, the mood among Republicans was largely triumphant. But Democrats were already looking ahead with a focus on next year’s midterm elections, when they hope to wrest control of the House and Senate. Polls have shown that the Republican tax overhaul is unpopular with the public, and Democrats hope to turn the biggest Republican legislative achievement into a liability in next year’s races.
Schumer warned that Republicans would come to regret rushing the tax bill through Congress on their own.
“This tax bill will be an anchor around the ankles of every Republican,” he said.
Protesters also made themselves heard as both chambers voted. As senators cast their final votes on the bill, protesters rose in the gallery of the chamber and began chanting “Kill the bill, don’t kill us.”
On the floor of the Senate, the Treasury secretary, Steven Mnuchin, observed the proceedings, as senators mingled. Republican Sens. Susan Collins of Maine and Jeff Flake of Arizona laughed as they spoke to each other while protesters implored them to change their minds and vote down the legislation.
But Republicans predicted that their support of the tax bill would be vindicated as voters see its effects.
“I frankly think Democrats have overplayed their hand,” Brady told reporters, “because when people back home and our local businesses see the tax relief, they’re going to know they weren’t really told the truth by the opponents of tax reform.”
While the effect of the bill on people’s bank accounts and on the broader economy remains to be seen, there was little debate on Tuesday about the magnitude of what Republicans were on the verge of accomplishing.
Bob Packwood, the former Republican senator from Oregon who helped lead the 1986 tax effort, said that this year’s bill was at least as sweeping as the one that Ronald Reagan signed into law 31 years ago, even though the bills had different goals.
“They have achieved things that I was unable to achieve,” Packwood said.