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November 19, 2017 | Tax Cut Math: 6 Republican Senators Have Concerns, It Takes 3 Kill It

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
The House and Senate each have different tax proposals. The Senate may not pass anything.

Senate republicans have a 52-48 majority. They can afford to lose at most two votes is they wish to pass tax reform. But as it sits The Wall Street Journal reports Republican leaders are trying to corral at least half a dozen lawmakers who are voicing concerns.

Senators and Their Key Concerns

1) Bob Corker: Federal Debt

2) Jeff Flake: Federal Debt

3) Ron Johnson: Pass-Through Business

4) Lisa Murkowski: Health Care Provisions

5) Susan Collins : Health Care Provisions

6) John McCain: Defense Spending

Flake/Corker Details

Corker from Tennessee and Flake from Arizona are both retiring. Thus, campaign funding threats are no concern. Corker is wary of overstating the benefits and Flake is wary of optimistic revenue projections.

 “We have seen this before,’’ said Flake. “We make the cuts now. We rely on rosy economic assumptions. And then, in the out-years, if those don’t come about, we forget what we were supposed to do in terms of reform.”

Ron Johnson Details

Johnson is concerned about pass-through business tax breaks. The top pass-through rate in the House bill is 25% but some groups are excluded. (I am in the excluded group). In the Senate, the top tax rate is above 30%. Johnson says the Senate version treats “pass-through” entities unfairly and he would not vote for the bill.

Lisa Murkowski/Susan Collins Details

Along with McCain, Murkowski and Collins both voted against health care reform, killing the legislation. Every indication indication is they would do the same to tax reform if their demands are not met.

The Senate bill repeals the health care mandate. Murkowski is concerned that repealing the mandate will cause insurance premiums to rise.

Sue Collins wants Congress to pass a bipartisan bill to extend payments to insurers.

McCain Details

McCain does not object to the bill per se. Rather McCain is holding the bill hostage over defense funding. McCain wants at least $700 billion for defense funding for the rest of fiscal year 2018. Congressional leaders may not go along.

Additional Concerns

The Wall Street Journal reports on additional Collins Concerns Over Senate Tax Bill.

Sen. Susan Collins on Sunday recited a list of concerns she had with the Republican tax bill barreling through the Senate, raising pressure on the party’s leadership to slow its progress and make changes to secure passage.

“I want to see changes in that bill and I think there will be changes,” the Maine Republican said on ABC’s “This Week,” adding that she hadn’t yet decided to vote against it as it is currently written.

On Sunday, Ms. Collins said the Senate bill should reduce the corporate tax rate from 35% to 22%, not 20% as in the current bill, and use the extra revenue to retain the individual deduction for state and local taxes. The Senate bill currently would eliminate that deduction.

She also said the top individual tax rate should remain at 39.6%, as in the House bill and in current law, rather than the 38.5% rate in the Senate bill.

She said a provision in the Senate bill that would repeal the requirement that most individuals carry health insurance or pay a penalty shouldn’t be part of a final tax package, but if it is included, it should be accompanied by a measure stabilizing insurance markets and lowering premiums.

“If you do pull this piece of the Affordable Care Act out, for some middle income families the increased premium is going to cancel out the tax cut that they would get.” she said on CNN’s State of the Union, speaking of the 2010 health care overhaul that enacted the mandate.

Question of the Day

Tax Cut Math: 6 Republican Senators Have Concerns, It Takes 3 Kill It.
Will a Bill Pass Both Houses?

Mike “Mish” Shedlock

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November 19th, 2017

Posted In: Mish Talk

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