The GOP’s slimmer majority in the Senate and the chamber’s stricter budget rules gives its version the upper hand in the negotiations. But the party’s bigger challenge now is to figure out how to pay for the late changes that GOP lawmakers on both ends of the Capitol want to see made. In the House, Californians are pushing to salvage more of the state-and-local tax deduction in the final bill. Both versions would bar individuals from writing off their income taxes while allowing them to deduct up to $10,000 in property taxes from their federal bill. Republicans also want to eliminate an alternative minimum tax for corporations that made it into the Senate proposal shortly before it passed.
But if those provisions are sweetened, others must be toughened to fit within the Senate’s $1.5 trillion deficit limit. Under one option reported by multiple outlets on Tuesday, Republicans would set the corporate tax rate at 21 percent instead of 20 percent while making a deeper cut to the top individual income rate, to 37 percent from its current 39.6 percent. They would also split the difference between the House and Senate proposals by capping the mortgage-interest tax deduction at $750,000. (The House reduced it to $500,000 while the Senate kept it unchanged at $1 million.)
Those changes carry their own risks, however. Reducing the top income rate would be a gift to Democrats who have argued the GOP tax plan is a boon to the wealthy, while conservative activists are adamant that Republicans draw a line on the corporate rate at 20 percent. They worry that any breach of that threshold would represent a slippery slope for what they consider the central feature of the tax bill. “Twenty percent was a compromise. We wanted it to be at 15 percent,” warned Grover Norquist, president of Americans for Tax Reform, who was referring to the figure originally demanded by President Trump. “Moving to 21 percent or 22 percent is the beginning of the long march back to 35 percent.”
Where Republicans are in virtually unanimous agreement is the need to move quickly. Party leaders want to reach a deal in the next couple of days so the House and Senate can each vote on the final bill next week, meeting President Trump’s self-imposed Christmas deadline for signing it into law. “We all are still in intense discussions with our colleagues on the House side,” Senate Majority Leader Mitch McConnell told reporters on Tuesday. “We hope to wrap it up pretty soon.” Another senior Republican, Senator John Cornyn of Texas, reportedly said the two sides could reach a deal later on Tuesday, although the text would probably not be ready until the end of the week.
In rushing to get the bill to Trump’s desk, Republicans have barreled past all semblance of a deliberative legislative process. In the Senate, they held a vote earlier this month just a few hours after releasing the final legislative text, which was so haphazardly written that some provisions were scribbled in by hand. Republicans have tossed aside multiple projections that their plan would increase the debt by $1 trillion and fall short of its promised economic growth. And while they are—technically—holding a formal conference meeting that includes Democrats, it is all for show: By the time the panel holds its first and only public meeting on Wednesday, Republicans might already have a deal in hand.