Senate Republicans are forging their own path on the effort to overhaul the U.S. tax code, offering a plan Thursday that would delay President Trump’s top business priority and blow up House Republicans’ carefully crafted compromise on property tax deductions.
GOP Senate leaders unveiled a tax package that would delay cutting the corporate tax rate from 35 percent to 20 percent until 2019. That’s a major departure from Trump’s insistence on immediate tax cuts that he says are necessary to spur the economy.
The one-year delay would lower the cost of the tax bill by more than $100 billion, and negotiators are trying to preserve as much revenue as they can for other changes. But it could also delay companies moving back to the United States from overseas or prompt them to hold off on other decisions as they wait for the corporate rate to fall.
It was one of many trade-offs that Senate leaders made as they tried to craft a bill that would lower taxes but also add no more than $1.5 trillion to the debt over 10 years. Still, a number of changes are expected to be made as lawmakers begin debating the measure next week. The bill as currently constructed does not comply with Senate rules that prohibit certain legislation from adding to the deficit after 10 years.
This could force Republicans to make some of the taxcuts temporary, though those decisions have not yet been made.
Senate Republicans briefed White House officials on the one-year delay, and Trump administration officials said they would accept such a provision. To try to prod companies into expansion next year, the Senate bill would allow companies to immediately deduct all capital investments in 2018. Companies would be allowed to immediately expense these investments for five years.
The emerging Senate bill comes as the GOP’s broader tax cut effort comes into sharper focus. With the House likely to pass its version of the House bill as soon as next week, Republicans are making progress advancing Trump’s top legislative priority.
But before the tax cut bills can become law, the House and Senate must pass matching versions of the legislation, and a number of differences remain.
“We know we have more work yet to be done, but this is a historic step,” House Ways and Means Committee Chairman Kevin Brady (R-Texas) said. “Will there be some differences? Of course, that’s the legislative process. We welcome that.”