"A Potential Nightmare Scenario For The GOP": Tax Vote Delayed To Friday; May Include $350BN In New Tax Hikes

Update: The Senate tax plan roll vall vote which was widely expected to take place on Thursday evening, has been pushed back to 11am on Friday following the collapse of the "Trigger" compromise (discussed below) to win a majority for a Senate tax overhaul left Republicans scrambling to salvage the legislation, Bloomberg reports. While debate over the bill may continue into the evening, McConnell said. It’s unclear when the unlimited amendment vote series known as “vote-a-rama” would begin.

"For the information of all senators, the Senate will continue to debate the bill tonight. The next roll call votes will be at 11 a.m tomorrow morning," Mitch McConnell announced Thursday night. The decision to skip a late-night session came as deficit hawks, led by Bob Corker pushed for a guarantee that the Senate tax legislation won't increase the deficit. In its current format an analysis released late on Thursday found tax reform would cost $1 trillion.

As Bloomberg explains:

"the day’s events left GOP leaders contemplating a variety of potentially unpalatable measures -- including making some tax cuts on the individual and corporate side end within six or seven years. The current version of the Senate bill would sunset individual breaks in 2026."

And the punchline: "It’s a potential nightmare scenario for Republicans, who have been counting on a tax overhaul to be their first major legislative accomplishment of the year. The party is under enormous pressure to complete the tax measure with less than a year to go before the mid-term elections and with wealthy donors and large corporations demanding tax rate cuts."

* * *

Following a report from the Joint Committee on Taxation, which unveiled late on Thursday afternoon that the Senate Tax bill would generate enough economic growth to lower its $1.4 trillion revenue cost by only about $458 billion over a decade - in other words it would still boost the deficit by roughly $1 trillion - in a dramatic showdown on the Senate floor, GOP leaders agreed to effectively increase taxes by $350 billion in response to a procedural ambush by deficit hawks led by Sen. Bob Corker that nearly killed the GOP tax reform bill.

According to Bloomberg, Senator David Perdue, a Georgia Republican, said that GOP Senators are "discussing a new compromise for their planned tax overhaul that would increase taxes in future years."

David Perdue

Quoted by The Hill, Senate Republican Whip John Cornyn told reporters after a round of intense discussions on the floor, “we have an alternative, frankly, tax increase we don’t want to do to try to address Sen. Corker’s concerns.”  Cornyn said the details of the proposal are being worked out.

Corker had insisted on a "trigger" proposal that would have rolled back tax relief in case economic projections fell short of expectations; the flipside is that it would have also made any recession in the near future far worse by staggering tax increases just as the economy slowed down, in the process sending the deficit soaring and accelerating the economic contraction.

And in an unexpected, 11th hour reversal, the Senate parliamentarian ruled Tuesday afternoon that the trigger would not pass procedural muster. “It doesn’t look like the trigger’s going to work according to the parliamentarian,” Cornyn said. Cornyn’s remarks came after an hourlong standoff on the Senate floor in which three Republicans - Corker, Ron Johnson and Jeff Flake - held up a procedural vote that would have sent the measure back to the Senate Finance Committee.

At least two of those members, senators Bob Corker of Tennessee and Jeff Flake of Arizona, had backed the trigger concept in recent days. Corker The deficit hawks threatened to vote for a motion to recommit the tax bill back to the Finance Committee. That move would have put the legislation in limbo for the foreseeable future and scuttled an all-night voting session on tax relief.

As The Hill adds, Republican leaders appeared extremely frustrated with Corker, Flake and Johnson during their intense discussions on Thursday night while the fate of the bill teetered in the balance.

McConnell’s face grew flushed as he huddled with Corker and Sen. Pat Toomey (R-Pa.), one of the main architects of the tax reform bill, while GOP colleagues crowded around them to listen in. Johnson said he joined Corker’s rebellion so he could win an assurance from GOP leaders about getting a vote on setting the corporate tax rate above the 20-percent level favored by President Trump.

Ultimately the hawks allowed the floor debate to continue, but it’s unclear whether or how their demands might be met. Meanwhile, Senator David Perdue said the estimated tax increase would be $350 billion over a decade. Cornyn told reporters that the size could be even larger. Senator Ron Johnson of Wisconsin said he held out as well, to ensure he can offer amendments, including one to raise the pass-through deduction to about 25%, paid for by eliminating the corporate deduction for state and local taxes.

Quoted by Bloomberg, Johnson said he doesn’t know if senators will finish the bill Thursday night. “We just saw a kink in the time plan right there so who knows what other cogs might be put in this wheel,” he said.

Republican Senator Lindsey Graham added: “I think you’re going to see a lot of these scrums, and here’s the way they’ll end: We’ll pass the bill sometime tomorrow.”

For the sake of the parabolic market, he better be right.