With Bloomberg writing this morning that "Mystery, Suspense Mount" two days after President Donald Trump told the American public that Congress was “just days away” on tax reform, two more senators - including one-time Trump rival - Marco Rubio appear to be getting cold feet - much to the market’s chagrin. Yesterday afternoon, stocks dropped and the VIX jumped above 10 as Rubio and Utah’s Mike Lee said they had reservations about the draft bill being put together by the conference committee.
While Rubio and Lee’s objections are different from Hatch’s, several senators have expressed concerns about one of the tax-reform plan’s overarching themes: namely, it benefits corporations and the wealthy, while not doing enough to help extend tax breaks to the middle and working classes.
Worries about the bill’s impact on the deficit have persisted, and if anything, they only intensified after the Treasury Department released a laughable one-page report about the tax plan’s impact on GDP and revenue that was widely ridiculed.
As the fast-moving Republican tax package has evolved, it has tilted increasingly toward benefiting businesses and wealthy taxpayers, a trend that aides were saying privately is a growing concern for some lawmakers. Provisions for offsetting the revenue costs of last-minute changes also were becoming worrisomely unclear, they said.
After resisting demands for weeks to cut the top income tax rate for the richest taxpayers, the bill’s authors did agree in recent days to lower it to 37 percent from 39.6 percent. “My concern is that if you found the money to lower the top rate ... you can’t find a little bit to at least somewhat increase the refundable portion” of the child credit? Rubio said.
Specifically, Rubio and Lee are pushing the bill’s authors to set aside more money for the child tax credit for working and middle class families - “I‘m a no ... It has to be higher than $1,100,” Rubio told Reuters.
White House spokeswoman Sarah Sanders said the White House will continue to work with Rubio on the child tax credit. So far, the bill’s biggest feature is a steep cut of the income tax rate to 21% from 35%, a step that corporate tax lobbyists have been pursuing for many years.
Meanwhile, Orrin Hatch, chairman of the Senate tax committee and one of the bill’s chief authors, said the Senate would probably vote on a final Senate-House measure on Monday, and that “he hoped” Rubio and Lee’s concerns would be addressed.
As Bloomberg pointed out, Hatch injected some more uncertainty into the process yesterday when he said he “didn’t know” if lawmakers would be able to meet Rubio’s demand. Asked if the Senate could pass the bill without Rubio’s vote, he said, "Probably." Separately, Sen. Cornyn, the Republican whip and one of the key stewards of the bill, has said Rubio and Lee’s concerns are being addressed.
“Sen. Rubio would like to see us do a little more, and we’re trying to work with him to get there,” said Sen. John Cornyn (R., Texas), a member of the tax negotiating team. “We’re trying to figure out what we can do. I can’t give the current state of play on that since it’s in flux, but the goal is to give a $2,000-per-child tax credit, with a significant portion of that to be refundable."
Rubio and Lee aren’t the only potential holdouts. Tennessee senator and deficit hawk Bob Corker - the lone Republican who voted with the Democrats against the initial Republican tax plan - has said his concerns about the Senate bill, specifically the addition of some $1.5 trillion to the national debt over 10 years, have not been addressed.
Corker’s not the only one who feels that way. As Bloomberg points out, at least three other senators have yet to publicly declare their support for the reconciled bill - and may well vote against it.
Jeff Flake of Arizona, who has voiced concerns about tax cuts adding to the deficit, said Thursday he’s undecided as well.
Susan Collins of Maine has voiced opposition to cutting the tax rate for incomes above $1 million and has pushed for passage of two health-care stabilization bills that the House has been cold to. She hasn’t committed to supporting the final tax measure. “I am going to review the tax bill over the weekend,” she said. “There’s lots of rumors about what’s in it, what isn’t."
There’s also uncertainty around the votes of GOP senators John McCain of Arizona and Thad Cochran of Mississippi. Both have been absent from the Senate this week with health issues, but officials have said both will be able to return for votes next week.
According to WSJ, the original plan had called for the Senate to vote on Monday, with the House following on Tuesday. Now, the sequence of those votes is up in the air.
House Speaker Paul Ryan said Thursday he’s not sure which chamber will vote first on the final bill. One consideration, he said, was “managing absences in the Senate” - likely an allusion to McCain’s and Cochran’s medical issues.
Trump has promised to pass the bill by Christmas. And earlier this week, the task of passing tax reform took on a new sense of urgency when Alabama Democrat Doug Jones defeated Republican Roy Moore in a tightly contested senate race that was marred by allegations of pedophilia against Moore.
Still, even if Republicans fail to pass tax reform - an outcome that would have wide-ranging implications for markets - we’ll always have this video of President Trump symbolically cutting the “red tape” representing America’s overwrought tax code...
In 1960, there were approximately 20,000 pages in the Code of Federal Regulations. Today there are over 185,000 pages, as seen in the Roosevelt Room.— Donald J. Trump (@realDonaldTrump) December 14, 2017
Today, we CUT THE RED TAPE! It is time to SET FREE OUR DREAMS and MAKE AMERICA GREAT AGAIN! pic.twitter.com/teAVNzjvcx
...Even if they fail to pass the bill.