How Republicans beat the odds on taxes

How Republicans beat the odds on taxes
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Republicans have done what some said was impossible: rewriting the tax code in President TrumpDonald John TrumpTrump threatens ex-intel official's clearance, citing comments on CNN Protesters topple Confederate monument on UNC campus Man wanted for threatening to shoot Trump spotted in Maryland MORE’s first year in office.

“This is a day I’ve been looking forward to for a long time,” Speaker Paul RyanPaul Davis RyanKrystal Ball: GOP tax cut is 'opiate of the massively privileged' Top GOP lawmaker: Tax cuts will lower projected deficit GOP super PAC seizes on Ellison abuse allegations in ads targeting Dems MORE (R-Wis.) said on Tuesday on the House floor just before the chamber voted. “We are about to achieve some really big things — things that the cynics have scoffed at for years, decades even.” 

The House on Wednesday afternoon sent the tax bill to Trump’s desk, ending a long legislative journey that began after the election and saw many twists and turns along the way.

Reforming the tax code has been a dream of the GOP for years, but past efforts crashed and burned due to fundamental disagreements with Democrats about what the legislation should achieve. Republicans also wrestled among themselves with the tradeoffs needed to pay for lowering tax rates. 

Then the 2016 election came.

“The president changed the terms of the discussion,” said a senior congressional aide. “Trump comes in as a tax cutter.”

Yet even after winning the White House and Congress, Republicans were uncertain of the path forward as they debated, both publicly and privately, what form the tax bill should take.

One of the key questions was whether the bill should be revenue-neutral, with reductions in tax rates canceled out by restricting deductions and tax breaks. Both Ryan and Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnell15 senators miss votes despite McConnell's criticism of absentees Overnight Health Care: Azar defends approach on drug rebates | Trump presses Senate to act quickly on opioid crisis | Kentucky governor's Medicaid lawsuit tossed Dem senator introduces proposal to rein in Trump on security clearances MORE (R-Ky.) had vowed the bill would be revenue-neutral, but other Republicans were pushing for a net tax cut.  

The fight was resolved in September, when Sens. Pat ToomeyPatrick (Pat) Joseph ToomeyOvernight Defense: Pick for South Korean envoy splits with Trump on nuclear threat | McCain blasts move to suspend Korean military exercises | White House defends Trump salute of North Korean general WH backpedals on Trump's 'due process' remark on guns Top GOP candidate drops out of Ohio Senate race MORE (R-Pa.) and Bob CorkerRobert (Bob) Phillips CorkerForeign Relations senators push back on WH aid cut Schumer blasts Trump over security clearances: This happens in dictatorships Senate GOP targets musicians Ben Folds, Jason Isbell as 'unhinged left' ahead of rally for Dem candidate MORE (R-Tenn.) reached an agreement on a budget resolution that would allow the tax legislation to add $1.5 trillion to the deficit.

Without that agreement, the senior congressional aide said, Republicans would have had to pass a less sweeping tax bill — if they were able to pass one at all.

“It was important and it got us started off in a place where the caucus could work together,” Corker said.

Ryan had pushed for revenue-neutral tax reform as part of his “Better Way” election platform, which was the basis for the original tax blueprint House Republicans released in June 2016.

The plan met fierce opposition from parts of the business community because of a provision that would create border-adjustment of taxation. 

The proposal would have subjected imports to U.S. tax while exempting exports, raising more than $1 trillion in revenue for the government.

Ryan and Rep. Kevin BradyKevin Patrick BradyTreasury releases proposed rules on major part of Trump tax law Republicans happy to let Treasury pursue 0 billion tax cut Trump weighs big tax cut for rich: report MORE (R-Texas), chairman of the House Ways and Means Committee, fought for months to keep the provision, calling it a natural outgrowth of Trump’s promise to prioritize job creation and manufacturing in the United States. 

But from the start, the White House was lukewarm on border adjustment, leaving it out of a one-page tax plan that Trump released in April. 

After a series of meetings between key players in the White House, House and Senate, Republicans in July agreed to abandon border adjustment — a key step that united business and conservative groups behind the broader tax push.

But some divisions among Republicans remained, including over tax rates and what changes should be made to popular credits and deductions in the tax code. 

One of the biggest pressure points came in the House, where members from high-tax states such as New York, New Jersey and California balked at a push from GOP leaders to eliminate the deduction for state and local taxes. They warned ending the deduction would be devastating for their constituents. 

In the end, the final bill capped the state and local deduction at $10,000 — still not satisfactory to many of those members, but enough to prevent a full-scale revolt that could threaten passage.  

Another sticking point for the bill came on ObamaCare’s individual mandate to have health insurance. 

The conservative Republican Study Committee pushed hard for the repeal of the mandate to be in the tax bill, with senators like Rand PaulRandal (Rand) Howard PaulPaul seeks to cut off Planned Parenthood funds via massive spending bill Arizona GOP Senate candidate defends bus tour with far-right activist Trump plays 'quick round of golf' with Rand Paul in New Jersey MORE (R-Ky.), Tom CottonThomas (Tom) Bryant CottonThe Hill's Morning Report — Trump showcases ICE ahead of midterm elections Sentencing reform deal heats up, pitting Trump against reliable allies The Hill's Morning Report: Dems have a majority in the Senate (this week) MORE (R-Ark.) and Mike LeeMichael (Mike) Shumway Lee2020 hopefuls skeptical of criminal justice deal with Trump Sentencing reform deal heats up, pitting Trump against reliable allies Senate gets to work in August — but many don’t show up MORE (R-Utah) calling for that step as well. Trump joined in, tweeting his desire for mandate repeal to be included.

Repealing the mandate ultimately made it into the bill, producing about $300 billion in budget savings that helped Republicans pay for the tax cuts. 

“This is going to be icing on the cake for us. It really is,” Republican Study Committee chairman Mark WalkerBradley (Mark) Mark WalkerThree scenarios for how leadership races could play out in the House Florida university to get early voting site after judge strikes down ban Student voter suppression is an affront to the memory of Andrew Goodman MORE (R-N.C.) said of the ObamaCare provision. 

The Senate also incorporated ideas from several members before passing its version of the tax bill. 

After Sens. Ron JohnsonRonald (Ron) Harold JohnsonDems to challenge Kavanaugh for White House records To solve the southern border crisis, look past the border GOP senator on revoking security clearances: 'I don't want to see this become routine' MORE (R-Wis.) and Steve DainesSteven (Steve) David DainesSanders: Public should be ‘very concerned’ about election security in 2018 Senate Democrats block resolution supporting ICE Republican bill aims to deter NATO members from using Russian pipeline MORE (R-Mont.) threatened to vote against the legislation out of concerns that it didn’t do enough to help pass-through businesses, senators bumped up the deduction the bill provides for income from those companies. Leaders also included several amendments requested by Sen. Susan CollinsSusan Margaret CollinsCollins, seen as possible swing vote, set to meet with Kavanaugh White House weighs clawing back State, foreign aid funding The Hill's Morning Report: Dems have a majority in the Senate (this week) MORE (R-Maine).

Even after both chambers passed their versions of the tax measure, Republicans continued to make revisions to prevent defections.

The refundable amount of the child tax credit was increased from $1,100 to $1,400 after Sen. Marco RubioMarco Antonio RubioGOP lawmakers raise concerns over research grants to colleges with Confucius Institutes Paid family leave could give new parents a much-needed lifeline GOP looks to injure Nelson over Russia comments MORE (R-Fla.) threatened to oppose the bill. And the $10,000 cap on state and local taxes was expanded from just being for property taxes to applying to income and sales taxes as well, in an effort to secure the votes of some Republicans from high-tax states.

Trump helped to sell the tax plan to the public in a series of speeches, but the White House also gave GOP leaders space, allowing them to fine-tune the details of the legislation until it had enough votes to pass.

Corker, who voted against the first Senate tax bill due to concerns about adding to the deficit, came around to supporting the final package after going through a self-described “long, arduous process.” 

He said he changed his mind about voting against the bill on Friday morning after having conversation with various experts and constituents, including Douglas Holtz-Eakin, the former Congressional Budget Office director, who reassured Corker with a variety of different economic and budget projections for the bill. 

"I talked with people around the country. I called the larger chambers of commerce throughout our state, I talked to the head of our economic and community development for the state of Tennessee. I talked to people that I really respect around the country on both sides of the aisle, just on the overall good for our country," Corker said.

Looming over the entire process on taxes was Republicans’ failed effort to repeal and replace ObamaCare. 

Rank-and-file members resented the top-down approach taken on health-care legislation, and GOP leaders learned from their mistakes. 

Leadership and the tax-writing committees took an inclusive approach to drafting the tax bill, discussing the issue regularly with rank-and-file members.

“I think we learned from the debacle roll out of the repeal of the [Affordable Care Act] there’s a better way to do this,” Walker said.

McConnell said the personal highlight of the saga for him came when Sen. John McCainJohn Sidney McCain15 senators miss votes despite McConnell's criticism of absentees What crime did Manafort allegedly commit? Primary challenge to Trump? It could help him in 2020 MORE (R-Ariz.), who stopped ObamaCare repeal, voted to pass the Senate’s first tax bill earlier this month.

“I think particularly given the way the last ObamaCare effort failed, it was to me a high point leading up to final passage," McConnell said in an interview with The Hill.

The pressure to deliver on tax reform was also heightened by the collapse of ObamaCare repeal in September.

Desperate for a legislative win, Republican lawmakers were willing to make compromises on some elements to get legislation across the finish line. For example, the bill doesn’t repeal the estate tax, and the tax cuts for individuals generally expire after eight years in order to have the bill comply with the Senate’s budget rules.

Republicans made tax cuts a key part of their campaign platform, and they say they have now made good on that commitment.

“I think the decision by House Republicans to deliver on this promise and to stay at it until we did, that has driven this all the way across the line,” Brady said. 

Alexander Bolton contributed.