Senate approves motion to go to tax conference

The Senate on Wednesday voted to go to conference with the House on tax-reform legislation, setting up negotiations to resolve the differences between the two chambers’ bills.

The motion to go to conference passed by a vote of 51-47. Sens. Lamar AlexanderAndrew (Lamar) Lamar AlexanderSens introduce bipartisan bill matching Zinke proposed maintenance backlog fix Supreme Court vacancy throws Senate battle into chaos Overnight Health Care: Anti-abortion groups see chance to overturn Roe v. Wade with Kennedy retirement | HHS watchdog to probe detention center conditions | VA pick vows to oppose privatization MORE (R-Tenn.) and Al FrankenAlan (Al) Stuart FrankenFranken offers Dems a line of questioning for Kavanaugh's 'weirdly specific bit of bulls---' The Hill's Morning Report — Sponsored by PhRMA — GOP lawmakers race to find an immigration fix Richard Painter puts out 'dumpster fire' in first campaign ad MORE (D-Minn.) did not vote.

“The American people deserve taxes that are lower, simpler and fairer,” Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellDoug Jones walks tightrope on Supreme Court nominee Kavanaugh gets questionnaires for confirmation hearing Dem infighting erupts over Supreme Court pick MORE (R-Ky.) said, adding that voting to go to conference makes the Senate “one step closer to getting it done.”

The House voted to go conference on Monday. Unlike the House vote, where some conservatives initially held out on voting for the motion to push for a longer stopgap government funding bill, the Senate vote went smoothly.

GOP lawmakers are confident that they will be able to reconcile the House and Senate tax bills and send a final bill to President Trump’s desk by Christmas.

Still, there are a number of differences between the House and Senate measures that will have to be addressed.

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The differences include that the House bill has fewer individual tax brackets than the Senate bill, and the House keeps the top rate at 39.6 percent while the Senate would drop it to 38.5 percent.

Both bills would lower the corporate tax rate from 35 percent to 20 percent, but that rate would take effect in 2018 in the House bill and in 2019 in the Senate bill.

The two bills also take different approaches to lowering taxes for pass-through businesses, such as partnerships and sole proprietorships, that have their income taxed through the individual code, and also have different provisions aimed at preventing an erosion of the U.S. tax base.

Because the Senate has to follow strict budget rules in order to pass tax legislation with a simple-majority vote, and the chamber’s Republicans advanced their bill with only one vote to spare, tax experts think the final bill will look more like the Senate bill than the House bill.

But a number of Republicans would like to eliminate or alter a provision that was added to the Senate bill shortly before passage: the corporate alternative minimum tax (AMT).

The House bill would repeal the corporate AMT, and while the Senate bill initially did so as well, the tax was ultimately retained in the Senate bill in order to raise revenue to pay for other changes.

However, businesses are warning that keeping the corporate AMT could be problematic and could effectively eliminate the benefit of provisions such as the research and development tax credit. Since the rate for the AMT is 20 percent and the regular corporate rate would also be 20 percent, many businesses would be subject to the AMT, which disallows a number of tax preferences.

The Joint Committee on Taxation estimates that keeping the corporate AMT would raise about $40 billion over 10 years, though some experts suggest that estimate is low.

The conference committee may also make changes to the state and local tax deduction that is treated differently in the chambers’ individual tax bills.

The bills would eliminate the deduction for state and local income and sales taxes and cap the deduction for property taxes at $10,000. But lawmakers are discussing allowing some type of income-tax deduction in an effort to provide more tax relief to people in high-tax states such as New York and California.

McConnell told radio host Hugh Hewitt Wednesday that allowing people to pick between deducting income and sales taxes “sounds like a kind of reasonable idea.”

The Senate bill, but not the House bill, repeals the ObamaCare individual mandate. The House appears likely to get on board with this provision, with House Ways and Means Committee Chairman Kevin BradyKevin Patrick BradyOn The Money — Sponsored by Prudential — Trump angers GOP, businesses with new tariffs | Liberals see Kavanaugh as mortal threat to consumer bureau | Lawmakers pitch family leave plans Trump tariffs prompt rising fear, anger from GOP, business Top House Republican calls for Trump to meet with Chinese president over trade war MORE (R-Texas) saying that he expects there is “strong support” for mandate repeal in the House GOP caucus.