How Republicans pulled off the biggest tax overhaul in 30 years

[Leroy N. Soetoro]

https://www.washingtonpost.com/business/economy/how-the-republicans-
pulled-off-the-biggest-tax-overhaul-in-30-years/2017/12/20/efcba3c4-e54e-
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In the days leading up to a critical Senate vote earlier this month on the
GOP tax plan, Republican Sen. Rob Portman (Ohio) met secretly with Sen.
Joe Manchin III (W-Va.) in the moderate Democrat’s hideaway office in the
basement of the Capitol.

Manchin told Portman he would consider joining the tax effort, if only for
a few changes. Chief among them: Instead of cutting the corporate tax rate
to 20 percent, reduce it to 25 percent — and use the proceeds for bigger
middle class tax cuts. Other Democrats, Manchin suggested, might follow.

Portman took the request to Republican leaders, who rejected it.

For Republican leaders, the prospect of a bipartisan deal that could have
solidified public support for the tax plan was far outweighed by the
imperative to keep the GOP unified and the belief that deep cuts in
corporate taxes, more than anything else, were the recipe for economic and
political success.

“I would have preferred for it to have been bipartisan,” Portman said.
“There were certain things that he was looking for that didn’t fit with
the consensus that we had reached with the Republican conference.”

The result is a bill passed along strict partisan lines that now awaits
President Trump’s signature — the GOP’s crowning legislative achievement
in the first year of the party’s control of Washington.

The decision to spurn Democrats underscores the political risks undertaken
by the GOP, which pushed forward on the tax bill despite polls showing it
is one of the most unpopular pieces of legislation in recent history and
independent, nonpartisan analyses projecting it will disproportionately
reward the wealthy and corporations, offer only moderate benefits to the
middle class and substantially drive up the deficit.

Republicans argue, however, that the cuts will spur economic growth, and
that everyday Americans will reward the GOP for creating jobs, boosting
their paychecks and simplifying the tax-filing process for millions of
households

“My view of this: If we can’t sell this to the American people, we ought
to go into another line of work,” Senate Majority Leader Mitch McConnell
(R-Ky.) said after the final bill passed his chamber.

Republicans plowed forward even as foreboding political currents swirled:
the Russia investigation pushing Trump’s approval ratings ever lower, a
political upset in Alabama underscoring the fragility of their majorities
in Congress as midterms loom next year. The bill itself grew more
unpopular in every successive poll, yet the outside threats seemed to
sharpen the need to claim a political prize. Republicans dug in and stuck
to their schedule, a nearly unheard of achievement for a major bill.

The strategy was effective for several basic reasons, according to
interviews with more than a dozen Republican lawmakers, aides and
lobbyists.

[The final GOP tax bill is complete. Here’s what is in it.]

After earlier efforts to repeal the ACA collapsed, Republican leaders
decided to abandon the GOP principle of making sure the tax bill would not
add to the deficit and instead invested their faith in the view that tax
cuts can pay for themselves.

They learned from the calamitous health-care efforts, deciding to keep the
tax negotiations fluid until the very end, and used a variety of
techniques to coax reluctant Republican lawmakers to support the
legislation.

They managed to contain a volatile president, using his support where
helpful but trying to avoid rhetorical broadsides that could upend the
sensitive negotiations.

And they held closely to their view that deep corporate tax cuts were the
most important thing to assure the success of the tax bill, and, despite
the legislation’s billing, tax cuts for working families had to be a
second-tier goal.

Without a dramatic reduction in the corporate tax rate, Republicans
believed, they would have lost their chance to make American companies
more competitive in a globalized economy.

“The president cared a lot about the business rate — it was the single
biggest topic the president talked about,” National Economic Council
Director Gary Cohn said Wednesday.

The push begins

It was the day after the presidential election, and Kevin Brady’s
cellphone was blowing up.

Trump had secured a shocking win, ending six years of divided power in
Washington. Business executives, lobbyists and fellow lawmakers were all
ringing Brady (R-Tex.), the House Ways and Means chairman, asking one
question:

What’s border adjustment?

It was a wonky-sounding term, for years an idea only discussed in academic
circles, but it also stood out as a powerful tool that could allow
Republicans to hold fast to their long-held belief that a tax overhaul
shouldn’t add to the deficit.

It was, in fact, the only serious idea they had to significantly remake
the tax code — crucially, dropping the corporate tax rate from 35 percent
to the low 20s or below — without significantly driving up the deficit.

The provision was effectively a new tax on imports, and it would not just
generate about $1 trillion in new tax revenue but also serve as an
incentive for businesses to keep operations in the United States.

Republicans had included the border-adjustment tax in their 2016 campaign
plan, a document largely ignored until Trump won. But now Republicans
controlled the levers of power, and the House agenda had the most complete
tax plan around.

“It just went up to a new level of intensity, right the day after the
election,” Brady said.

For some industries — particularly retailers and manufacturers who
purchase their raw materials abroad — the implications were glaring: The
corporate rate would be lowered on their backs.

[The tax bill is likely to become more popular after passage. Here’s how
Republicans plan to sell it.]

Sen. Tom Cotton (R-Ark.) — whose constituents include the world’s largest
retailer, Walmart — compared the idea to something out of Orwell: “Some
ideas are so stupid only an intellectual could believe them,” he said in a
February floor speech. “This is a theory wrapped in speculation inside a
guess.”

As the Republicans faced a lobbyist revolt at the start of the new
administration, private negotiations among what was called the “Big Six” —
the top Republican leaders in the House and Senate, the chairmen of the
two tax-writing committees, Treasury Secretary Steven Mnuchin and Cohn —
weren’t going any better.

Senate Majority Leader Mitch McConnell (R-Ky.) and Sen. Orrin G. Hatch (R-
Utah), the chairman of the Senate Finance Committee, didn’t see the border
tax as politically feasible. While Trump appeared to endorse the concept
at times, seeing it as the type of border tariff he had campaigned on,
divisions within the White House kept him from embracing it. House Speaker
Paul D. Ryan and Brady, who had spent years warning about the risks of
mushrooming federal deficits, were loath to abandon it.

There appeared to be no way forward, and some in the party had already
begun to lower their expectations of a once-in-a-generation tax overhaul.

Divisions on the deficit

It took a massive failure on another policy to clarify things.

Early on the morning of July 28, Sen. John McCain (R-Ariz.) turned his
thumb downward, casting the deciding vote against his own party’s health-
care bill, and his colleagues immediately feared he had done even worse.

From the beginning, the GOP’s effort to remake the nation’s health-care
system was racked with infighting propelled by ideological, temperamental
and geographical divisions within the party — not to mention delay after
delay that only amplified waves of public protests that relentlessly
targeted individual lawmakers.

It seemed quite possible the tax effort would fare similarly.

But hours before McCain’s vote, the “Big Six” released a statement: “While
we have debated the pro-growth benefits of border adjustability, we
appreciate that there are many unknowns associated with it and have
decided to set this policy aside to advance tax reform.”

As Republicans pondered how they had failed so badly on health care, the
“Big Six” had made a fateful decision that would clear the way for the tax
overhaul. The group had killed the border adjustment tax, and with no
plausible alternative, they had effectively removed the requirement that
the tax plan not add to the deficit.

Brady said he and other Republicans were simply convinced the tax effort
would boost economic growth enough that the requirement was no longer
necessary.

“In my view over time this tax reform plan will recoup these revenues,” he
said. “Without tax reform we are doomed, to a slower economy and higher
deficits.”

The failure on health care, Portman said in an interview, “concentrated
the mind on how do we avoid this” when it came to tax legislation.

Even if Republican leaders were now prepared to borrow money to pay for
the tax bill, they still had to win over the support of Republican
lawmakers who saw the nation’s rising debt as the biggest threat to
American prosperity. Chief among them was Sen. Bob Corker (R-Tenn.), a
member of the Senate Budget Committee with an independent streak who had
been openly clashing with Trump.

McConnell asked Corker to craft a deal with Sen. Patrick J. Toomey (R-
Pa.), a longtime advocate of supply-side doctrine who believed big tax
cuts spur economic growth.

The two senators, McConnell later said, “represented the yin and yang” on
the issue.

White House officials initially thought they could not achieve a very big
tax cut — maybe $1 trillion — but for months Toomey had been pressing his
colleagues for at least double that. Toomey persuaded White House
officials to request a larger package from his colleagues on the Senate
Budget Committee, while he would continue advocating for the even bigger
number he wanted, making the administration’s request seem modest.

During a meeting in McConnell’s office with the Republicans on the Budget
Committee, the plan played out perfectly, Mnuchin said the White House
wanted a $1.5 trillion tax package, according to a person involved in the
discussions who requested anonymity to describe the private deliberations.
Toomey said he wanted a package that was more than $2 trillion, and Sen.
Ron Johnson (R-Wis.) chimed in that he wanted a tax-cut package that was
even bigger than that.

The White House and a number of Republicans were bombarding Corker with
huge numbers all at once, numbers that were much bigger than many had
thought possible.

Corker settled on the $1.5 trillion range, with the expectation that later
steps would be taken to limit the impact of the legislation on the debt.

A corporate-rate standoff

From the beginning, the centerpiece of the plan was the reduction in the
corporate rate, and for more than a year, Trump had promised 15 percent.

On Capitol Hill, that number was considered unworkable — it would open a
gaping revenue hole and create a huge gap between the rates paid by owners
of other businesses not organized as taxable corporations.

Publicly, the president kept the pressure on. But privately, Trump
signaled to tax negotiators some flexibility. “Twenty is a pretty number,”
he said on one conference call in early summer.

[The essential trade-off in the Republican tax bill, in one chart]

While Trump and the House felt comfortable with 20 percent, McConnell and
Hatch wanted more flexibility. But by late September, the negotiators knew
they needed to be on the same page, providing very broad principles to the
House and Senate’s tax-writing committees so they could shape legislation
that would pass their respective chambers.

The result would be a “unified framework” sparse on details. It would look
a lot like the House blueprint, including a 20 percent corporate rate. But
it would omit the difficult provisions — any offsets that would help pay
for the plan.

With days remaining until the Big Six was due to release its framework,
Trump dropped a bomb on the proceedings: Under no circumstances, he
privately told the negotiators, would he accept a corporate rate over 18
percent. That would cost hundreds of billions of dollars more over the
coming decade and threaten the viability of the entire effort.

It fell to Ryan to walk Trump back from the edge: If you agree to 20
percent, he told the president on a phone call, we will keep it there.

Trump relented.

“He was very vocal about his views on this stuff,” said Sen. John Thune
(R-S.D.). “But I do think that he was good at interacting with people who
had differences of opinion about the legislation but not browbeating them,
not embarrassing them but really working with them.”

Securing the votes

Even with broad agreement on the shape of the legislation, the House and
Senate faced two sharply different calculations.

For the House, it came down to a bloc of blue-state Republicans threatened
by a proposal to significantly scale back or do away with the state and
local tax deduction.

The tax break had been part of the federal tax code since the income tax
was first instituted in 1913, and it had largely survived every effort to
scale it back thanks to the clout of lawmakers from New York and other
high-tax states that disproportionately benefited.

But in 2017, the politics were different: There were no Republican
senators representing New York, New Jersey, California and other high-tax
states. There were a handful of GOP House members from those states, but
not so many that Republican leaders felt they absolutely had to be
accommodated.

This time around, House Republicans proposed limiting the deduction to
allow people to reduce only up to $10,000 in property taxes.

That was enough to split the bloc: Several Republicans representing the
New York suburbs abandoned the bill, but most upstate Republicans and Rep.
Tom MacArthur of New Jersey got on board. The 14 California Republicans,
meanwhile, were keeping relatively quiet. The $10,000 property tax
deduction didn’t help their constituents much at all: California has
relatively low property taxes and relatively high income taxes.

But the nation’s most powerful California Republican, House Majority
Leader Kevin McCarthy (R-Calif.), privately assured them that the problem
would get fixed. It might not happen in the House bill, he told them. It
might not happen in the Senate bill, either. But he promised them that it
would get fixed, and 12 of the 14 ultimately voted to pass the bill.

“The bill would not have passed if we didn’t have the support and votes
from New York and California,” said Rep. Steve Scalise (R-La.), the House
majority whip. “Kevin made a commitment: This will get fixed in
conference, and he never wavered in seeing that through.”

In the Senate, McConnell faced a different problem. There wasn’t one bloc
of potentially aggrieved lawmakers but at least nine Republicans who could
present problems. Republicans could afford to lose only two votes given
the chamber’s 52 to 48 split.

Sens. Susan Collins (Maine), Lisa Murkowski (Alaska) and McCain had doomed
the Affordable Care Act repeal earlier that summer, on a combination of
concerns about drastic changes to health care and the Senate bypassing its
usual process.

Corker and Sen. Jeff Flake (Ariz.), both of whom had announced they
wouldn’t be running for reelection, were worried about the impact on the
federal debt.

Sens. Marco Rubio (Fla.) and Mike Lee (Utah) were upset their proposed
expansion of a child tax credit benefiting families wasn’t included in the
bill.

And Johnson and Sen. Steve Daines (Mont.) complained that businesses that
pay taxes through the individual tax code — so-called pass through
entities — weren’t getting as significant a rate cut as corporations.

With the health care debate earlier this year, a series of similar types
of concerns had led the Republicans to, in rapid succession, present
different versions of the legislation, failing each time to advance it and
embarrassing Republican leadership and the White House.

This time around, McConnell worked to avoid a similar situation.

He and top lieutenants summoned lawmakers in small groups to his ornate
suite of offices on the second floor of the Capitol to fill them in on
details of the bill and hear out their concerns. Before each group
departed McConnell delivered a message: Don’t draw red lines, least of all
in public, about what should be in or out of the bill.

“If you can, keep your powder dry,” Thune said, summing up McConnell’s
message. “Don’t go out and publicly define yourself in a way that prevents
you from ultimately being able to get back to ‘yes.’”

For the most part lawmakers heeded McConnell’s request, even as tax
writers added controversial measures to the Senate bill. Most notably,
they made the individual tax cuts sunset in 2025 and added a repeal of the
Affordable Care Act’s individual mandate.

But one by one, all but one of the senators were won over.

Collins got agreement from McConnell to pass legislation — still to be
delivered — stabilizing the health-care law. Murkowski got a provision
that would enable drilling for oil off Alaska’s shores. McCain was
convinced the Senate had followed the type of process he had insisted
upon.

“The other high point for me was John McCain’s decision to come on board
early. .?.?. It meant a lot to me personally,” McConnell said. “I think
that was a critical moment for us.”

Flake got a promise Congress would move forward to address the status of
young undocumented immigrants who had come to America as children. Johnson
and Daines were given a more generous “pass through” provision.

Rubio agreed to vote the measure, suggesting he would pull back his
support if Republicans later made the plan more advantageous for the
wealthy without doing more for working families.

The bill finally passed the Senate in the early morning hours of Dec. 2,
after a wild night full of last-minute scrambling as Democrats erupted in
fury over leaked drafts with portions crossed out and revisions scribbled
in the margins.

Corker was the lone “no” vote after leaders couldn’t overcome his concern
about estimates the bill would add at least $1 trillion to the deficit.

Final steps

Then came the process of reconciling the House and Senate bills. The bill
was in precarious shape, especially with two ailing GOP senators, Thad
Cochran of Mississippi and McCain, whose ability to show up for the final
vote was in question.

Republicans absorbed a political body blow when Democrat Doug Jones won a
special Senate election in Alabama, but nonetheless they stayed on track,
more determined than ever to deliver the legislation to Trump by
Christmas.

At the 11th hour, Republicans pushed up the corporate tax rate to 21
percent while moving the effective date of the corporate tax cut earlier
and reducing the top income tax rate.

But then Rubio threatened to oppose the bill unless the child tax credit
was sweetened; leaders met his demand. And in a surprise, Corker announced
he would vote for the bill after all, angrily denying that language that
could benefit real estate developers had anything to do with it.

“Failure was never an option,” Scalise said. “We knew we had to get this
done.”

Stunningly for legislation of such magnitude, Republicans had stuck to
their timetable. Everything was lined up for final passage through the
House and the Senate on Tuesday. But after the House had acted and left
for the night came one final hiccup — Senate Democrats succeeded in last-
minute parliamentary maneuvers that knocked out a few minor elements of
the bill.

One piece the Democrats successfully challenged? The title of the
legislation itself, “The Tax Cuts and Jobs Act,” was found impermissible
under the chamber’s arcane guidelines.

So the House had to come back into session Wednesday to pass the revised
bill, an anticlimactic finale for the first tax overhaul in three decades.

One thing is certain: The nation has a new tax code. Much of the rest is a
guessing game. Only in coming years will the parties learn who wins and
loses as a result of the legislation, and whether workers will see the
benefits that have been promised them.

As for Manchin, the Democrat who wanted to get to yes, he says he regrets
Republicans didn’t welcome his overtures. He’d also objected to the bill’s
Affordable Care Act mandate repeal, but gave Republicans a number of ways
to address his concerns that he felt were reasonable.

“They were determined to make this a political bill, a partisan bill, and
they didn't need anybody. They didn’t want anybody,” he said early
Wednesday morning as the Senate passed the final bill. “I even said,
‘Don’t you at least want the appearance — even if you get two or three of
us — even if you get one of us?’?”


--
Donald J. Trump, 304 electoral votes to 227, defeated compulsive liar in
denial Hillary Rodham Clinton on December 19th, 2016. The clown car
parade of the democrat party has run out of gas.

Congratulations President Trump. Thank you for ending the disaster of the
Obama presidency.

Under Barack Obama's leadership, the United States of America became the
The World According To Garp.

ObamaCare is a total 100% failure and no lie that can be put forth by its
supporters can dispute that.

Obama jobs, the result of ObamaCare. 12-15 working hours a week at minimum
wage, no benefits and the primary revenue stream for ObamaCare. It can't
be funded with money people don't have, yet liberals lie about how great
it is.

Obama increased total debt from $10 trillion to $20 trillion in the eight
years he was in office, and sold out heterosexuals for Hollywood queer
liberal democrat donors.