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 TrumpMia Love pulls ahead in Utah race as judge dismisses her lawsuit Trump administration denies exploring extradition of Erdoğan foe for Turkey Trump congratulates Kemp, says Abrams will have 'terrific political future' MORE’s first year in office.

“This is a day I’ve been looking forward to for a long time,” Speaker Paul RyanPaul Davis RyanHow this year’s freshmen can save the Congress — and themselves Democrat Katie Porter unseats GOP's Mimi Walters Amazon fleeced New York, Virginia with HQ2 picks 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 McConnellAs Democrats gear up to challenge Trump in 2020, the key political divide will be metropolitan versus rural McConnell: Criminal justice bill unlikely this year On The Money: Why the tax law failed to save the GOP majority | Grassley opts for Finance gavel, setting Graham up for Judiciary | Trump says China eager for trade deal | Facebook reeling after damning NYT report 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 CorkerCIA concludes Saudi crown prince ordered Khashoggi murder: report  McConnell, Flake clash over protecting Mueller probe Overnight Defense — Presented by Raytheon — Border deployment 'peaked' at 5,800 troops | Trump sanctions 17 Saudis over Khashoggi killing | Senators offer bill to press Trump on Saudis | Paul effort to block Bahrain arms sale fails 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 BradyGOP lawmaker pushes back on Trump drug pricing proposal Tax law failed to save GOP majority Overnight Health Care — Presented by The Partnership for Safe Medicines — Juul halts retail sales for most flavored e-cigs | CDC confirms 90 cases of rare polio-like illness | Physicians push back on Trump plans to redefine gender 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 PaulOvernight Defense — Presented by Raytheon — Lawmakers struggle with how to punish Saudi Arabia | Trump regrets not visiting Arlington for Veterans Day | North Korea deports detained American Hillicon Valley: Facebook reeling after NYT report | Dems want DOJ probe | HQ2 brings new scrutiny on Amazon | Judge upholds Russian troll farm indictments | Cyber moonshot panel unveils recommendations Overnight Defense — Presented by Raytheon — Border deployment 'peaked' at 5,800 troops | Trump sanctions 17 Saudis over Khashoggi killing | Senators offer bill to press Trump on Saudis | Paul effort to block Bahrain arms sale fails MORE (R-Ky.), Tom CottonThomas (Tom) Bryant CottonMcConnell: Criminal justice bill unlikely this year Cotton opposes Trump-backed criminal justice bill Trump’s backing may not be enough on criminal justice reform MORE (R-Ark.) and Mike LeeMichael (Mike) Shumway LeeTrump’s backing may not be enough on criminal justice reform Senators introduce Trump-backed criminal justice bill Senators return to Washington intent on action against Saudis 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 WalkerDems seek to overhaul voting rules in Florida legal fight  Election Countdown: Abrams ends fight in Georgia governor's race | Latest on Florida recount | Booker, Harris head to campaign in Mississippi Senate runoff | Why the tax law failed to save the GOP majority McCarthy, other Republicans back Ratcliffe to be next attorney general 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 JohnsonOvernight Health Care — Presented by The Partnership for Safe Medicines — FDA restricts sales of flavored e-cigs | Proposes ban on menthol in tobacco | Left wants vote on single-payer bill in new Congress | More than 12k lost Medicaid in Arkansas Commerce Department IG to audit Trump's tariff exemptions Trump trip to rural Wisconsin highlights GOP’s turnout concern MORE (R-Wis.) and Steve DainesSteven (Steve) David DainesLawmakers say California will eventually get emergency funding for fire relief Tester fights for survival at home Trump planning fourth visit to Montana to battle Tester 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 CollinsMcConnell, Flake clash over protecting Mueller probe Overnight Defense — Presented by Raytheon — Border deployment 'peaked' at 5,800 troops | Trump sanctions 17 Saudis over Khashoggi killing | Senators offer bill to press Trump on Saudis | Paul effort to block Bahrain arms sale fails Senators introduce bill to respond to Khashoggi killing 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 RubioHillary advisers battle over whether she’ll run in 2020 Rubio defends '3 point kick' analogy: 'You think everyone who follows politics knows what a field goal is?' Lawmakers to introduce bipartisan bill targeting China's treatment of Muslims 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 McCainCindy McCain takes aim at Trump: We need a strong leader, 'not a negative Nancy' McCain would have said ‘enough’ to acrimony in midterms, says Cindy McCain Trump nominates Jim Gilmore for ambassador post 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.