Days before the Senate is expected to vote on a sweeping tax reform bill, a handful of Republican holdouts, motivated by a host of overlapping and often contradictory principles, threaten the bill’s prospects.
With a narrow 52 vote majority in the upper chamber, GOP leadership can afford only two Republican defectors if they hope to pass their proposal along party lines, qualifying the existing Republican holdouts as a serious cause for concern.
The potential defectors are motivated by a number of factors, including the proposal’s repeal of the Obamacare tax levied against consumers who choose not to purchase coverage, the degree to which the tax cuts will add to the growing deficit, and a dispute over the way in which small businesses are taxed.
Sens. Ron Johnson of Wisconsin and Steve Daines of Montana have withheld their support for the Senate proposal due to concerns that the legislation unfairly prioritizes the interests of corporations over “pass through entities,” or businesses that pass their earnings through to be taxed at an individual rate.
While Daines has kept his concerns about the pass through rate relatively quiet, Johnson has loudly voiced his opposition, accusing GOP leadership of failing their promise to aid small business owners in favor of a huge giveaway to corporations in the form of a 15 percent corporate rate cut.
“We can’t leave anybody behind, which is why they came up with the 25 rate for pass throughs,” Johnson told CNBC. “The problem is, neither the House or the Senate version really honored that commitment to pass-through businesses, which I argue are a huge engine of economic growth.”
“I don’t have the information on how much it would cost, how many pass-through businesses are being left behind that do compete globally. I can’t get the information. I’ve been asking. They don’t give it to me,” said Johnson, chairman of the Senate Homeland Security Committee.
Sen. Susan Collins of Maine has withheld her support for the bill, in part due to its repeal of the individual mandate, an Obamacare provision that amounts to a tax on those who choose to go uninsured. Collins is concerned about the implications of the repeal for the stability of Obamacare markets, as many experts have pointed out that eliminating the coercive measure will send healthy people fleeing the Obamacare exchanges, resulting in increased premiums.
Sen. Lisa Murkowski of Alaska, who joined Collins in opposing Obamacare repeal efforts in July, has said she would support repealing the individual mandate, but has not yet firmly committed to supporting the overall tax bill.
While he has not been as outspoken as Collins, Sen. Jerry Moran of Kansas has also expressed concern about the effect individual mandate repeal might have on his constituents.
Sens. Bob Corker of Tennessee and Jeff Flake of Arizona remain dubious regarding the leadership’s claim that the economic growth spurred by the bill will more than make up for the estimated $1.4 trillion it will add to the deficit over the next decade. Flake has pointed out that it is unclear exactly how much the bill will ultimately add to the deficit, because it is being scored as if the individual rate cuts will expire in 2025. This scoring has opened GOP leaders to charges of obscuring the bill’s true budgetary impact, because they have openly said the cuts will likely be extended past the expiration date due to the political cost associated with failing to renew tax cuts.
Process concerns and deficit considerations have thus far prevented Sen. John McCain of Arizona from offering his support.
Sen. James Lankford of Oklahoma has also expressed concerns about the deficit in recent days, announcing Monday that he working with colleagues on a measure that would curtail the bill’s impact on the deficit by raising taxes if the bill doesn’t result in the expected degree of economic growth.
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