published Nov 6, 2017, 7:23:55 AM, by Sahil Kapur
(Bloomberg) —
The House tax-writing committee begins debate Monday on the GOP’s proposed overhaul, kicking off four frantic days for lobbyists and lawmakers to revise a bill that represents President Donald Trump’s final hope for a signature legislative achievement this year.

It could prove to be a make-or-break week. The head of the tax-writing panel, Kevin Brady, has signaled that he intends to allow revisions during his committee’s meetings this week — but not when the bill is on the full House floor. That means other House members will have to settle for a take-it-or-leave-it vote — perhaps as soon as the week of Nov. 13.

Lobbyists and lawmakers are going to want to make their preferred changes, but “people are dreaming — it’s awfully hard to get those tweaks in there,” said John Feehery, a Republican lobbyist and former House leadership aide.

White House legislative affairs director Marc Short downplayed concerns a vote would be rushed through, saying in an interview Monday on Bloomberg Television that “it’s not really four days” but rather several weeks, because the legislation also must clear the Senate and a conference process.

Democrats will get “every opportunity” to weigh in in the Senate, where amendments can be considered on the floor as well as in the committee progress, he said. Short acknowledged that Republicans have a “very narrow” margin for passage in the Senate but said, “We’re confident we’ll get it done.”

The strategy underscores the importance of reaching deals on such divisive provisions as ending most of the individual deductions for state and local taxes — part of the bill that would affect high-tax states like New York and New Jersey the most. Other points of contention include plans to reduce the cap on the mortgage-interest deduction to $500,000 and to create tough rules for which partnerships, limited liability companies and other so-called pass-through businesses would qualify for a major rate cut.

As lawmakers struggle to contain the costs of the tax package, it will be important for House leaders to control what amendments might be attached, Feehery said. “If you tend to pull one strand away then the whole thing collapses,” he said. “So that’s why you don’t want to have amendments on the floor. You have to pay for it somehow. And pretty soon you have this house of cards that’s going to collapse.”

Brady’s tactics represent the same approach GOP leaders have taken all year with the tax effort — negotiating details behind closed doors, keeping them highly guarded and then acting quickly after they’re revealed. The purpose is to keep intra-party dissension and lobbyists at bay. Republican leaders took a similar tack on repealing Obamacare; the bill eventually passed the House before dying in the Senate.

Offshore Taxes

Another potential obstacle for the tax bill arose Sunday as investigative reports surfaced alleging offshore tax-avoidance by U.S. multinational companies including Apple Inc. along with offshore holdings by members of the Trump administration. Congressional Democrats and tax-advocacy groups said the findings meant House Republicans should slow down their efforts.

Brady responded by saying lawmakers “have a pretty good handle” on how to address the erosion to the U.S. tax base that results when corporations shift profits offshore and would stick with their timetable.

Rallying their own party members around the tax bill will top the House GOP leaders’ agenda. Because they aren’t counting on any Democratic support, they must ensure that the bill that clears Ways and Means would lose no more than 22 of their members on the floor.

Powerful lobbying groups that represent small businesses, real estate and charitable organizations have already said they’re opposed to the House bill.

Following a Ways and Means meeting Sunday afternoon, Brady said his committee was working with the independent business lobbyists to make changes to the bill’s pass-through provisions. The panel will “continue to look to ways to simplify pass-through relief both for smaller and larger pass-throughs,” he said, while adding there would still be guardrails in place so owner-operator businesses see the most relief.

‘Dead Fish’

“This is the challenge of a lifetime, legislatively,” Brady said during an interview with Politico at an event in Washington on Friday. He predicted that getting it done “won’t be easy,” but expressed a sense of desperation that’s been palpable among Republicans after so far failing to pass major legislation in Trump’s first year in office.

“We’ve not delivered on our promise on health-care repeal,” Brady said. “It’s critical that we deliver on our promise on tax reform.”

The Ways and Means panel is scheduled to begin marking up the legislation on Monday at noon, and allow “four days of open, full-throated debate,” Brady said. Brady defended his inclination to preclude floor amendments by saying that a tax overhaul means “changing the biggest economy on the planet.” He expressed a desire to prevent a situation where “really bad things happen.”

Senate Minority Leader Chuck Schumer charged Republicans with being ashamed of their bill.

“That’s why they don’t want hearings. That’s why they won’t want discussion,” said Schumer, a New York Democrat. He compared the legislation to “a dead fish — the more it hangs out in the sunlight the stinkier it gets.”

Middle-Class Families

GOP leaders also face the balancing act of not losing some members by trying to appease others. Some Republicans have voiced concerns about how middle-class families will fare, while some conservative activists have said they’re upset with Republicans for maintaining a 39.6 percent rate for the highest incomes. Americans For Prosperity called it “disappointing to see House Republicans succumb to the politics of envy.”

Senate Majority Leader Mitch McConnell made a bold promise in an interview Saturday with MSNBC’s Hugh Hewitt: “At the end of the day, nobody in the middle class is going to get a tax increase,” he said. Brady has refrained from making that categorical promise.

Already, a pair of analyses — one from an official congressional scorekeeper and another from a conservative-leaning policy group — suggest that the bill would benefit high earners most in the long run and would fail to pay for itself through economic growth.

The House legislation is expected to cut taxes for many middle-income earners, but the elimination of various tax breaks — such as state and local taxes, personal exemptions, and tax breaks for extensive medical expenses and adoption costs– will hit some middle class families with high bills, experts say.

1 Percent

In 2018, the top 1 percent of earners would see after tax gains of 7.5 percent, while the bottom 20 percent would see just a 0.8 percent boost under the House tax bill, according to an analysis by the conservative Tax Foundation. In 2027, the disparity would be a bit more muted, with top earners gaining 3.3 while the bottom 20 percent see a 0.4 percent increase.

Meanwhile, Congress’s Joint Committee on Taxation has found that by 2023, the bill’s changes would mean higher federal tax bills for some, including those who make between $20,000 and $40,000 and those who make between $200,000 and $1 million.

Another factor that could complicate plans is the potential addition of a provision to repeal the Obamacare individual mandate — doing so would raise an estimated $416 billion over a decade. House Speaker Paul Ryan said on “Fox News Sunday” that House Republicans are considering adding the provision, as requested by Trump.

“Yes, we have an active conversation with our members in a whole host of ideas on things to add to this bill. And that’s one of the things that’s being discussed,” he said. “That’s among the ideas that a lot of members are suggesting that we could add to this bill to make it even better.”

But adding the repeal provision might make matters worse in the Senate. A “skinny” repeal of Obamacare that scrapped the individual mandate failed in July to pass the Senate after three GOP senators defected. Brady declined to comment Sunday on whether any discussions were focused on repealing the mandate in the tax bill.

Senate Bill

So far he’s offered only a brief indication of what’s to come: “At the start of our markup on Monday, I will also offer an additional amendment making more substantive improvements to the bill,” he said.

Others suggested that any additions to the bill won’t be that unexpected.

“I think it’s very possible you’ll see some tweaks, but nothing in the bill should come as a real surprise to anyone,” said Chris Hartline, a former House Republican budget aide. “They’ve spent a lot of time getting input and buy-in from members across the conference.”

But even if House Republicans are able to keep their members in line this week and next, another threat to passage may be taking shape across the Capitol: Senate Republicans are gearing up to release their own tax bill, which is likely to have different provisions and create fresh points of contention.

Brady’s Senate counterpart, Finance Chairman Orrin Hatch, said he plans to release a version for his committee to consider “once the House Ways and Means Committee completes its work, hopefully toward the end” of the week.

–With assistance from Kaustuv Basu and Colleen Murphy.To contact the reporter on this story: Sahil Kapur in Washington at skapur39@bloomberg.net To contact the editors responsible for this story: Alexis Leondis at aleondis@bloomberg.net John Voskuhl

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