Senate votes to pursue tax bill
negotiations with House
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[December 07, 2017]
By David Morgan and Amanda Becker
WASHINGTON (Reuters) - U.S. Senate
Republicans agreed to talks with the House of Representatives on
sweeping tax legislation on Wednesday, amid early signs that lawmakers
could bridge their differences and agree on a final bill ahead of a
self-imposed Dec. 22 deadline.
The Republican-led Senate voted 51-47, along party lines with Democrats
opposed, to begin formal conference negotiations to reconcile rival
House and Senate tax bills passed last week.
The move, which follows similar House action this week, brings Congress
a step closer to sending President Donald Trump a tax overhaul that he
can sign into law.
House and Senate negotiators will need to work out differences on issues
ranging from business taxes to the repeal of the Obamacare mandate that
Americans obtain health insurance or face a penalty before lawmakers can
pass a final version.
But John Cornyn, the No. 2 Senate Republican, said he was optimistic
House and Senate tax negotiators would be able to work out an agreement
within the next two weeks.
"Given the similarities between the House and the Senate bills, I think
there are some obvious targets where they need to focus their attention
but obviously they won't be rewriting the bills," Cornyn said.
Republican negotiators must be careful not to agree to changes that
could diminish support in the Senate, where they can afford to lose
support from no more than two party members.
There has been no major tax overhaul since 1986, when Republican Ronald
Reagan was president.
While there are significant differences between the House and Senate
bills, both would cut the U.S. corporate tax rate to 20 percent from 35
percent, provide tax relief for "pass-through" enterprises including
small businesses where earnings are taxed at individual rates, and both
benefit the wealthiest Americans and reduce the tax burden for most
middle-class taxpayers.
Republicans claim the legislation will spur enough economic growth to
pay for the tax cuts with new revenue, but the nonpartisan Joint
Committee on Taxation estimates that Senate bill would still add $1
trillion to the federal budget deficit over a decade, even with an
economic upswing.
U.S. stock prices have rallied on growing optimism that tax legislation
will become law.
DEFICIT WARNING
But on Wednesday, the head of sovereign credit ratings at S&P Global
told Reuters that the rising deficit and looser fiscal policy could
prompt negative action on U.S. credit ratings unless Washington
addressed long-term budgetary issues.
"If U.S. tax reform is approved, it seems certain to increase the
federal budget deficit," Moritz Kraemer, S&P's sovereign global chief
rating officer, said in an interview.
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Sen. John McCain heads to the Senate floor ahead of votes on Capitol
Hill in Washington, U.S., December 6, 2017. REUTERS/Aaron P.
Bernstein
"A meaningful relaxation of fiscal policy without countervailing
measures to address the longer-term fiscal challenges of the U.S.
could lead to a negative rating action."
Senate Republicans later voted down a Democratic motion instructing
tax negotiators to produce a deficit-neutral bill.
Passage of the tax bill would provide a badly needed legislative
victory for Trump and Republicans after their failure earlier this
year to enact legislation repealing President Barack Obama's
signature healthcare law.
Trump and his Republican allies see enacting the tax overhaul that
they promised voters as crucial to their strategy for the 2018 U.S.
congressional elections, when all 435 seats in the House of
Representatives and 33 seats in the 100-member Senate will be up for
election.
Democrats have been united against the bill, calling it a handout to
corporations and the rich that would drive up the federal deficit.
In an early sign of progress on reconciling the House and Senate
versions, Senator Orrin Hatch, chairman of the tax-writing Finance
Committee, said he did not think that the final bill would retain a
corporate alternative minimum tax (AMT).
The House bill calls for a repeal of the corporate AMT, which is
designed to limit the ability of corporations to reduce their
payments through tax breaks and credits. Corporate AMT repeal is not
part of the Senate version.
Getting rid of the corporate AMT would be popular with many
businesses and would also be a concession toward the House bill.
But repeal would also require lawmakers to replace the $40 billion
in revenues that retaining the corporate AMT would raise over a
decade. Increasing the corporate income tax target from 20 percent
is seen as one way to pay for the AMT repeal and other potential
changes.
"I'll keep it at 20 if I can, but there's a drive to get it to 22.
They want more money, that’s why," Hatch told reporters.
(Additional reporting by Richard Cowan; editing by Caren Bohan and
Will Dunham)
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