GOP tax negotiators -- slowly but surely -- hammering out final bill details

When it comes to the GOP tax plan, lawmakers are in what one source described to CNN as "this bizarre moment where ev...

Posted: Dec 11, 2017 1:48 PM
Updated: Dec 11, 2017 1:48 PM

When it comes to the GOP tax plan, lawmakers are in what one source described to CNN as "this bizarre moment where everyone knows this can and will get done, but nobody's really ready to actually get to that point yet."

Translation: There's a lot of pride of authorship when it comes to the House and Senate versions. And that doesn't necessarily lend itself to easy dealmaking, even when the frameworks align fairly closely.

The first conference committee for the GOP tax bill is expected Wednesday

Also expected Wednesday, President Donald Trump is planning to speak on taxes

Bottom line: Slowly, but surely, a final proposal is being hammered out. But into, and at various points throughout, the weekend, several sources involved acknowledged to CNN that things just aren't moving quickly -- and at times it has been frustratingly slow -- as some key lawmakers dig in on specific provisions.

What to watch: Keep an eye on every Republican on the conference committee. If they start splitting publicly on specific provisions, or moving off into public cliques for or against specific issues, that would signal a more serious problem than is thought to currently exist. But all involved say that's still very unlikely.

The timeline: GOP leaders and negotiators plan to have a final agreement nailed down by the end of this week. The House would vote first, likely on December 19.The Senate would follow the next day. That all remains fluid. But that has been the goal for more than a week and remains so today.

President Trump

There's plenty of Hill chatter about what the President will say and do later this week when he talks taxes. It will be the same day as the first public conference committee meeting and has been communicated to Hill Republicans as the President's final big effort to push things across the finish line.

There's no question Trump has been helpful in very specific ways -- in particular with senators such as Ron Johnson of Wisconsin and Rand Paul of Kentucky.

But there are also no shortage of lawmakers and aides who vent frustration for the lack of a laser focus on the other side of Pennsylvania Avenue on the effort -- and blame that more than anything else for the moribund approval ratings for the bill so far.

Suffice to say, all eyes will be on this event.

About that first conference committee meeting (expected to be Wednesday):

Call it what it is: a show.

There have been major pieces of legislation hammered out in public conference committees -- the type that go for hours on end, day after day as hundreds of amendments, Republican and Democrat, are offered. (The legislation that became the Dodd-Frank Act was a prime example of this.)

This is not that. At all.

The work is being done behind the scenes. Democrats will get no say in the matter. There's a primary reason why: the calendar. They want this done early next week. Full, open conferences take a long time.

"We'd have no problem doing a big open conference," one Republican aide said. "We just don't have time for it."

The problem right now

There's a couple of things that are going on right now, according to several people involved. First, the grind it out work of reconciling the bills from a purely legislative language process, while also ensuring it aligns with Senate budget rules is complicated and takes time.

But more importantly right now: The two chambers don't trust one another much. Senate Republicans made clear their provisions should take priority because of their budget rules and slim margin for error (Senate Majority Leader Mitch McConnell can only afford to lose one more vote when the bill comes back to the floor).

House Republicans say their Senate counterparts are leaning too heavily -- and unnecessarily -- on their rules, still view the Senate's health care failure as an abomination and note that a lot of their members took their own very difficult tax votes and expect their versions of specific things to win out in the end.

Were it not for the topline similarity of the proposals, and the political imperative of getting something done, it's a recipe for a blowup.

Again, nobody involved sees that coming. But that's what's been defining the first week-plus of talks.

Ironic turn of events: House Republican leadership's impressive vote on their tax bill -- 227 yes votes, when they only needed 217 -- may actually hurt them in these negotiations. They have space to work with and lose votes, while still getting it over the finish line. Senate Republicans don't. Vote counts play a role in which provision wins in the end, no question about it.

Two things, more than anything else, will dictate which provisions end up on in the final bill: how much they cost and Senate rules.

The conflicts

It's no secret that there are plenty of areas where the House and Senate bills diverge, but here are some examples of the political realities that may guide the policy decisions made in the days ahead (and to be clear: this is nowhere near an exhaustive list -- just a sample):

The deduction for State and Local Taxes (SALT): In the end, the Senate came toward the House on this. But top House negotiators now want more -- for a specific reason. A large group of California House Republicans voted for the bill with the promise it would get better, later. Well, a property tax only SALT deduction doesn't do much for Californians, which already have a capped property tax. That's why the talks are ongoing to expand the eligibility for the deduction to include income and sales tax, but still have it capped at $10,000.

The Corporate Alternative Minimum Tax (AMT): The blowup over the Senate GOP decision to put the corporate AMT not only back into the bill, but at the same exact rate as current, has clearly dominated discussions throughout K Street the past 10 days. House lawmakers have been unequivocal: it must come out. But there's a way to draft it that will still raise revenue, but not implode the muni market or the research and development tax credit. That's what the discussion is over right now.

The $2,000 Child-tax-credit: The House bill boosted the CTC to $1,600. The Senate to $2,000. GOP Sen. Marco Rubio of Florida said anything lower than the Senate version would be problematic. It's a very expensive provision, but one the Senate version is expected to win out on in the end.

Mortgage interest deduction: The House caps it at $500,000 for new mortgages and eliminates it for second mortgages. The Senate leaves it untouched. Sources involved say expect some kind of middle ground here -- say, $750,000. But make no mistake about it, as time has gone on (and the housing interest groups have flooded lawmaker offices), the Senate version has appeared more appetizing by the day. But again -- it's a revenue thing. And this is far from the single top priority.

The estate tax: Both bills double the threshold for estates to be taxed to $11.2 million, but only one repeals the tax entirely, eventually (the House version). To put it plainly, Republicans involved know it's a tough messaging issue and that repeal is both expensive, and looks particularly bad given the current balance of the corporate to individual side cuts. But this is an issue deeply ingrained in the party's economic orthodoxy. Expect the Senate version to survive -- purely for revenue reasons. But there's a real fight over this right now.

Pass-throughs: McConnell's ability to solve the Johnson pass-through puzzle was crucial to locking in the votes needed to pass the bill for the tax bill. The House takes a very different approach, though with similar rate goals. It's a battle between who is favored -- passive owners or active owners, and it remains unclear who is going to win out in the end. But it's clear that Johnson (and Sen. Steve Daines of Montana) concerns will need to be addressed in any final deal.

The Flake deal: Much attention was paid to the Deferred Action for Childhood Arrivals program piece of Sen. Jeff Flake's deal to vote for the bill, but the clear reason was the changes he got to the expensing provision -- a phase out, instead of a clean sunset, of the provision that allows businesses to immediately write off the cost of new equipment purchases. This is, again, another very expensive provision. But it was crucial to Flake's vote -- moreso than anything else. As such, expect it, or some close version of it, to survive.

The Collins deal: The provisions Sen. Susan Collins of Maine got into the Senate bill -- the SALT property tax deduction, medical expense deduction, catch-up contributions on retirement accounts for public employees -- are all expected to survive. Collins has made very clear she'll vote against the final proposal if it doesn't include what she negotiated into the Senate version. So expect these all to survive.

A final Collins note

There have been a lot of headlines in recent days noting that Collins is reserving the right to vote against the final tax bill. That is not new, nor is it news. This has always been the case -- and was at the crux of her negotiations with McConnell. She had specific asks. Those asks were addressed in the Senate bill. If they aren't in the final version, she'll be a "no."

The bigger question right now is the future of the commitments she got outside the tax bill -- that Congress would move forward on the health care cost sharing reduction bill proposed by Sens. Patty Murray and Lamar Alexander, and a separate piece of legislation providing federal funds for a reinsurance proposal. Many have scoffed at the idea those have any chance of becoming law -- going so far as saying Collins "got rolled."

Keep in mind:

(A.) Collins is an experienced legislator and

(B.) McConnell doesn't make promises to members of his conference he doesn't intend to keep. Does that mean those health care provisions have a clear path into law? Absolutely not. House Republicans have zero appetite to deal with them. The White House isn't going to go out of its way to get them done. But several aides have made clear to me: don't dismiss them yet.

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