The First ‘No’ Vote on the Senate Tax Cut Bill Gets the Ball Rolling

Just as with the failed attempt to repeal Obamacare, Republicans can only afford to lose two votes in the Senate on their tax cut plan. That would leave the vote 50-50, with Mike Pence breaking the tie. If they lose 3 votes, the party’s over.

We already have the first “no” vote and it doesn’t come from one of the usual suspects. Sen. Ron Johnson (R-WI) said yesterday that he can’t support the bill.

Mr. Johnson said Republican plans prioritize corporations over “pass-through” entities—sole proprietorships, partnerships, limited liability companies and S Corporations—whose owners pay taxes through individual returns and at individual income-tax rates, rather than corporate rates. The Senate plan, like the House plan, proposes to cut the corporate rate from 35% to 20%.

Top rates for pass-through filers would remain over 30% in the Senate version of the bill and the House bill substantially constrains how much pass-through income could be taxed at a new 25% rate.

Meanwhile, Senate Republicans have decided to add a repeal of the Obamacare mandate to the bill in order to help pay for tax cuts.

Repealing the mandate, which compels most Americans to buy health insurance or pay a fine, would free up more than $300 billion in government funding over the next decade that Republicans could use to finance their proposed tax cuts, but it would result in 13 million fewer people having health insurance, according to projections from the nonpartisan Congressional Budget Office.

The CBO has also projected that repealing the individual mandate would drive up insurance premiums for many Americans by roughly 10 percent.

That brought this response from Sen. Susan Collins:

“I am no fan of the individual mandate and I very much want to see tax reform,” she said slowly and carefully. “But I believe taking a particular provision from the Affordable Care Act and appending it to the tax bill greatly complicates our efforts. One of my concerns is that it will cause premiums in the individual markets to go up as healthier, younger people drop out.”

“I have new statistics,” Collins added, patting a thick black binder under her arm, “that show that for some middle-income people, it will cancel out their tax cut. The increased premium would be more than the tax reduction they would get from this bill.”

At this point, Collins isn’t saying she’ll vote “no,” but is doing her usual “I’m concerned” routine, as is Lisa Murkowski.

“Are you going to have a situation where your premiums are now going to increase?” she said. “Tell me how that’s making me a happier person in the middle class here. That’s a consideration I think is very real and needs to be weighed.”

Since the Republicans have staked their claim on lowering the corporate tax rate to 20 percent, the only way for them to accommodate Johnson’s concern is by lowering the rate for pass-through entities. That adds to the deficit problem. In a similar vein, the only way to address the concerns expressed by Collins and Murkowski is to drop the plan to repeal the Obamacare mandate, which also raises the deficit. If they can’t keep the projected deficits under control, they can’t pass this bill via reconciliation. And if they lose those three votes, the tax bill is dead.

We’re just getting started on this one, folks. But perhaps it reminds you of the jam Republicans got themselves into when they tried to repeal Obamacare. This time they got greedy in their attempts to give big tax cuts to rich people and corporations, while attempting to use the complicated process of reconciliation to avoid working with Democrats. It’s just a different verse of the same old song.

Nancy LeTourneau

Nancy LeTourneau is a contributing writer for the Washington Monthly.