Evening meetings. Late night calls. An all out push behind the scenes from several officials atop President Donald Trump’s administration.
What’s happening on the tax bill right now underscores two things:
1.This is the crucial final stretch for what GOP leaders hope will be their lone major domestic achievement of this year.
2. They don’t have the votes for it right now.
Where the votes currently stand:
There aren’t any surprises here for GOP leaders on the numbers — aides said they whipped the bill last week to get an early check on things and were aware of that they had work to do. What they didn’t expect was that they’d run into serious problems before they even got to the floor — that’s where they were last night.
There are more than a half-dozen Republican senators who have voiced concern with the proposal the Senate Finance Committee approved before Thanksgiving. Senate Majority Leader Mitch McConnell can afford to lose … two. Aides still believe they can get there. But they’ve got work to do.
Not all “concerns” are created equally. These are the senators GOP leaders are really concerned about at the moment:
Sen. Ron Johnson of Wisconsin (pass-throughs)
Sen. Steve Daines of Montana (pass-throughs)
Sen. Bob Corker of Tennessee (deficit)
Here’s what you should be focused on at this moment:
The Senate Budget Committee consideration of the tax proposal Tuesday afternoon at 2:30 p.m. ET. Two of the senators on the above list are on that committee. Republicans hold a 12-11 advantage on the committee. That means if just one of those senators decides to vote against the proposal in committee, it will stall out.
Is the chance this could go down in committee real?
Yes. According to several GOP sources, as of last night, there has been no indication Johnson will back off his threat that he’ll vote against the proposal if he doesn’t get what he wants on changes to how the plan addresses the tax rate on pass-through income. The frustration last night hit the point where GOP aides said they might go ahead with the committee vote anyway, just to put everyone on record, even if Johnson continues to hold out. In other words, even if they know it would fail.
If this goes down in committee Tuesday, is it dead?
Nope. It’s borderline catastrophic in the short-term from an optics perspective, especially in the wake of how smooth sailing the process was in the House. But all it would mean is Republicans would just need to keep working behind the scenes, then bring it up in the committee again.
What are we actually seeing right now?
On some level, it’s a game of chicken — both sides pushing to see if the other will buckle. Nobody wants the public spectacle of this failing in committee. But frustrations on all sides are really at that point right now.
Three things that can happen Tuesday:
1. Johnson comes around, Budget Committee approves the bill, it’s on the floor by Wednesday
2. Johnson votes against the measure in committee, it goes down, Republicans have to keep working to address his concerns before trying again.
3. Republican leaders postpone the markup to avoid a public failure.
Don’t forget: Trump will meet with GOP senators at their weekly closed-door policy lunch right before the Budget Committee takes the bill up. Trump and his top advisers have been very active in working Johnson in the last 10 days. We’ll see if that pays off in the next 24 hours. Despite numerous occasions when the President has frustrated GOP leaders with his closed-door comments, this is one situation where his presence is being viewed a potentially very positive development. So long as it is handled properly, of course.
Speaking of which: I’m told there’s been an all-out blitz from administration officials over the last week — from Trump to Vice President Mike Pence to economic adviser Gary Cohn to Treasury Secretary Steve Mnuchin to career Treasury staff to the President’s daughter Ivanka Trump — the administration is putting in a lot of work on the phones to try and get Republicans on board. Nobody on the Hill thinks it’s a determining factor, but it’s not going unnoticed.
Also of note: Historically, in these situations cooler heads eventually prevail. Senators and staff were riled up last night — they know they are close on this bill and they desperately want to get it across the finish line. Problems were bound to come up, but this one has been particularly vexing, and more importantly, is far more urgent because of Johnson’s position on the budget panel.
What’s really happening right now?
There was an evening meeting with top staff and a few senators Monday night and calls. Is there a chance Johnson could get what he wants? GOP aides aren’t optimistic.
In fact, several people CNN spoke with involved in the process are having a difficult time trying to pin down exactly what he wants (the floated idea of bumping up the pass-through credit currently in the Senate bill — from 17.4% to 20% – has more or less been shelved as not doing enough for him. Also it’s enormously expensive).
Johnson has been sending ideas and proposals to GOP and Finance Committee leaders for days, but as of this moment, no solution has been satisfactory. As one GOP aide put it simply last night regarding Johnson: “He’s just a tough nut to crack right now.”
The rub on all of this: What Daines and Johnson want on pass-throughs costs money — like serious money. Republicans only have $80 billion of space to work with to stay under the $1.5 trillion deficit target the budget rules require. And adding more money runs contrary to what the deficit hawks — another problematic group for leaders — are looking for.
It’s a tough spot to be in for GOP leaders. Give one way and the bill risks running afoul of reconciliation rules and risks the votes of deficit hawks. Don’t give at all and risk losing Johnson and Daines.
A revenue idea
Both Johnson and Daines have mentioned the possibility of repealing the state and local tax deduction for businesses (as they’ve proposed on the individual side). It’s an idea that would raise more than $100 billion and could help pay for the pass-through changes. The issue here is that corporations face a second layer of taxes on their profits, so GOP leaders are very wary of the idea given boosting the corporate side is such a key component of their rosy growth projections.
To make something clear: Pass through entities are often short-handed as “small businesses.”
To a degree, that’s true — they are partnerships, S-Corps, LLCs that can be very small, that pass their business income through to the individual side and pay that tax rate.
But pass-throughs are also composed of hedge funds, and law firms, and various other millionaire and billionaire type entities. This effort is being driven in part by outside interests who want to (A.) make sure they qualify for the lower pass-through rate and (B.) just want that rate to be as low as possible.
It’s inaccurate to say this is “all about small mom-and-pop businesses.” It’s not. There are very wealthy interests at play here.
Republican officials know the score(s)
They may disagree with them or dispute the findings altogether, but GOP leaders are aware of the various non-partisan analyses that show their bill has negative effects for those making under $30,000 immediately, and leaves those making under $75,000 worse off at the end of a decade. Adding tens of billion of dollars to aid pass-throughs as those numbers sit out there is not ideal.
Speaking of which: Read CNN’s Tami Luhby’s great piece on why the scores looks so bad for the lower income (spoiler: it’s the individual mandate repeal).
When it comes to the ‘deficit caucus,’ keep an eye on this:
The effort to get some kind of “backstop mechanism” — or back-up plan if economic growth targets fail to reach the plan’s goals — into the bill is real, and has been discussed by Sen. James Lankford, Bob Corker and Jeff Flake with leadership.
The details of it are still unclear — it would be some kind of snap-back provision if growth projections aren’t hit. But Flake told CNN last night it would largely address his deficit concerns (he still has other concerns on the expenditure side) and Lankford and Corker clearly like it.
It’s unclear how tenable it is — one GOP aide told CNN the idea of snapping back rates on the individual side — equivalent to a guaranteed tax increase, even as the corporate side remained untouched — is one hell of a tough sell on the messaging side of things.
On top of that, setting in stone automatic increases while not taking into account that the economy can change for any number of reasons (based on economic history, the US is long overdue for a recession). But bookmark the idea. It’s gonna be around all week.
The positive news for GOP leaders
Aides say they are growing increasingly comfortable with where Sen. Lisa Murkowski stands right now on this vote. Her position has been far different from health care — she has raised concerns, but none that show steadfast opposition to the bill. And the inclusion of the Arctic National Wildlife Refuge drilling provision in the bill continues to be the issue aides point to as to why there is belief in leadership circles Murkowski will be a “yes” in the end. She has said she’s still reviewing the proposal at this point.
And, in somewhat of a surprise:
There’s legitimate optimism among GOP aides that there’s a path to “yes” with Maine Sen. Susan Collins.
It’s a heavy lift, GOP leaders know that. But as one aide told CNN last night, she has absolutely left herself space to get to “yes.” A second source said the effort to get to yes on Collins’ part is real and concerted.
She might not get there, but unlike health care, there’s an opening here. Collins has had several one-on-one meetings with McConnell and his team and has been deeply involved in the process in recent weeks. That’s a dramatic change from health care, when she was more or less written off from the start.