Congressional Republicans on Friday unveiled the final version of their dramatic U.S. tax overhaul — debt-financed cuts for businesses, the wealthy and some middle-class Americans — and picked up crucial support from two wavering Senators ahead of planned votes by lawmakers early next week.
Passage of the biggest U.S. tax rewrite since 1986 would provide Republican lawmakers and President Donald Trump their first major legislative victory since he took office in January. Prospects for approval soared after Republican senators Marco Rubio and Bob Corker pledged support.
Three Republican Senators, enough to defeat the measure in a Senate that Mr. Trump’s party controls with a slim 52-48 majority, remained uncommitted: Susan Collins, Jeff Flake and Mike Lee.
No surprises
The final version hammered out between Senate and House of Representatives Republicans after each chamber previously passed competing versions contained no surprises.
It would cut the corporate income tax rate to 21% from 35%, according to a summary distributed to reporters by congressional tax writers. Corporate tax lobbyists have been seeking a tax cut of this magnitude for many years.
The Bill, the summary showed, would create a 20% business income tax deduction for owners of “pass-through” businesses, such as partnerships and sole proprietorships; allow for immediate write-off by corporations of new equipment costs; and eliminate the corporate alternative minimum tax.
Under a new territorial system, the Bill would exempt U.S. corporations from taxes on most of their future foreign profits. It also sets a one-time tax for companies to repatriate more than $2.6 trillion now held overseas, at rates of 15.5% for cash and cash-equivalents and 8% for illiquid assets.
If passed by Congress, the changes would be in effect for 2018 taxes, with tax returns for 2017 unaffected.
Democrats have been unified against the measure, calling it a giveaway to corporations and the rich that would drive up the federal deficit.
Bernie Sanders, a leading liberal voice in the Senate who unsuccessfully sought the Democratic presidential nomination last year, called the Bill “a moral and economic obscenity”.
“It is a gift to wealthy Republican campaign contributors and an insult to the working families of our country,” Mr. Sanders said.
Republicans have said the tax cuts are needed because the economy is not expanding quickly enough. “Now the American people are closer to a plan that will deliver higher wages, lower taxes, a simpler system, and a stronger American economy,” House Republican leader Kevin McCarthy said.
The House was expected to vote on the Bill on Tuesday. Republicans have a large majority there, and passage was expected despite Democratic opposition. The Bill would then go to the Senate. Republicans can afford to lose only two votes from within their own ranks and still win Senate passage.
The tax Bill was expected to add at least $1 trillion to the $20 trillion U.S. national debt over 10 years, making it an unusual example of deficit spending on stimulative tax cuts at a time when the economy is already expanding.
For months, Mr. Trump has touted the Bill as a middle-class tax cut. Studies from independent analysts and non-partisan congressional researchers have projected that corporations and the rich would benefit disproportionately.
First big win for Trump
Mr. Trump, who last year promised voters major tax cuts, wants a Bill on his desk before the Dec. 25 Christmas holiday so he can sign it into law and finish 2017 with at least one big win in Congress before the 2018 mid-term election campaigns, when Republicans will defend their Senate and House of Representatives majorities.
As the tax package evolved, it tilted increasingly toward benefiting businesses and the wealthy. Provisions for offsetting the revenue costs of last-minute changes were troublesome for some lawmakers.
The Senate vote outlook has been complicated by Republican Senator John McCain’s hospitalisation for treatment for side effects of cancer therapy. His office said he “looks forward to returning to work as soon as possible“.
