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 AlexanderOvernight Health Care: Senators target surprise medical bills | Group looks to allow Medicaid funds for substance abuse programs | FDA launches anti-vaping campaign for teens The Hill's Morning Report — Sponsored by United Against Nuclear Iran — Kavanaugh confirmation in sudden turmoil Cruz gets help from Senate GOP in face of serious challenge from O’Rourke MORE (R-Tenn.) and Al FrankenAlan (Al) Stuart Franken#MeToo era shows there's almost never only one accuser, says Hill.TV's Krystal Ball Hypocrisy in Kavanaugh case enough to set off alarms in DC GOP in striking distance to retake Franken seat MORE (D-Minn.) did not vote.

“The American people deserve taxes that are lower, simpler and fairer,” Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellSanders hits Feinstein over Kavanaugh allegations: Now it’s clear why she did nothing for months On The Money: Senate approves 4B spending bill | China imposes new tariffs on billion in US goods | Ross downplays new tariffs: 'Nobody's going to actually notice' McConnell tamps down any talk of Kavanaugh withdrawal 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 BradyHouse GOP bill a mixed bag for retirement savers China imposes new tariffs on billion of US goods: report Trump announces tariffs on 0B in Chinese goods MORE (R-Texas) saying that he expects there is “strong support” for mandate repeal in the House GOP caucus.