WASHINGTON _ In a bid to make their proposed corporate tax cut permanent and avoid adding to the long-term deficit, Senate leaders are now proposing to have most of the expanded individual benefits offered under their plan expire at the end of 2025.
The new details of the Senate GOP plan, released late Tuesday, would also effectively repeal, starting in 2019, the individual mandate under the Affordable Care Act that requires all Americans to have health insurance.
Republicans plan to use that move, which would save an estimated $318 billion over 10 years, to make their plan more attractive to middle-class Americans, at least initially.
They would lower certain individual tax brackets from the 22.5 percent, 25 percent and 32.5 percent proposed last week, to 22 percent, 24 percent and 32 percent.
The revised plan also would increase the current child tax credit from $1,000 to $2,000. The original Senate plan proposed raising it to $1,650.
"Ultimately, I'm more than willing to defend the decision to end the individual mandate taxes," Senate Finance Committee Chairman Orrin Hatch, R-Utah, who drafted the revisions, said Wednesday at the start of a hearing on the new bill. "It's the right thing to do. Far more people will be better off as a result."
But those changes, as well as reforms to help lower costs for so-called pass-through businesses that pay taxes through the individual code, would expire in eight years to avoid adding to the deficit.
The changes sparked outrage from Democrats. "This bill seems to get worse by the hour," Sen. Ron Wyden, D-Ore., said at Wednesday's hearing.
"For multinational corporations, their handouts are set in stone, written in ink, locked in place with the key thrown away. But not for the middle class," he said. Wyden noted that the individual tax cuts don't even last a full decade.
He also pointed out that the Congressional Budget Office has forecast that repealing the health insurance individual mandate would cause an average increase in premiums of about 10 percent a year.
"For middle-class families, premium increases are the same thing as tax increases," Wyden said.
All the changes in the bill related to individual tax cuts would disappear after 2025, including the proposed doubling of the standard deduction. But that also means the deduction for state and local taxes, which the original Senate bill eliminated permanently, would return in 2026. State tax deductions, including property tax deductions, are mostly used in California, New York and other high-tax states that are Democratic strongholds.
To ease concerns of Republicans in some of those states, the House bill eliminates the deduction for state and local income and sales taxes, but keeps it for property taxes up to $10,000.
Although the state and local deduction would not be permanently eliminated by the revised Senate bill, that might not satisfy House Republicans who worked hard to forge the compromise to keep the property tax deduction.
Expiration of the individual tax breaks was done to allow Senate Republicans to address the complicated math they face. Because the Senate is planning to use a special budget reconciliation process to pass the tax bill, the proposal must not increase the deficit after 10 years, according to an arcane Senate regulation known as the Byrd rule.
The changes to the bill mean it would add $1.4 trillion to the deficit over 10 years, down from $1.5 trillion in the original bill and below the threshold needed to pass the legislation on a simple majority vote in the Senate.
But more importantly, revenues turn positive in 2027, adding $30 billion to the Treasury, according to an analysis by the congressional Joint Committee on Taxation, and allowing the bill to meet the Byrd rule requirement.
The expiration of the individual tax cuts is likely to bolster criticism that the GOP overhaul favors corporations over middle-class Americans.
"Republicans have put themselves between a rock and a hard place: dramatic tax increases on the middle class or a huge hole in the deficit," said Senate Minority Leader Charles E. Schumer, D-N.Y. "Our Republican colleagues, particularly the deficit hawks, can't have it both ways."
The structure of the bill remains the same _ lowering rates, but eliminating many deductions, including the state and local property tax deductions important to California, New York and other states that some House Republicans are fighting to preserve.
Senate Republicans hoped that by lowering rates on filers in the midrange tax brackets, it would make up for the loss of those deductions.
House Republicans, though, are unsure as they head toward a procedural vote Wednesday on their bill.
While adding the Obamacare repeal may win over some votes, it also complicates GOP politics, because it would not take effect until after December 2018.
The delay may provide some comfort to reluctant Republicans, including Sen. Susan Collins, R-Maine, and Sen. Lisa Murkowski, R-Alaska, as analysts show 13 million more Americans would be uninsured by 2027 if the individual mandate is repealed.
Repealing the mandate also keeps the issue prominent for the 2018 midterm elections and conservatives want the repeal done sooner.
.jpg?w=600)
