House Republicans passed a sweeping tax overhaul that delivers a deep, lasting cut for corporations and temporary benefits for individuals, putting President Donald Trump one step away from his first major legislative victory.
The bill, dubbed the Tax Cuts and Jobs Act, passed 227 to 203. Only 12 Republicans—mostly from high-tax states where some taxpayers stand to see higher bills—voted against the measure.
“Today, we are giving the people of this country their money back,” House Speaker Paul Ryan said just before the votes were cast. He called the measure “real relief” for Americans who have struggled during what he called “the worst recovery since World War II.”
The legislation—which has scored poorly in public opinion polls so far—will immediately become one of the biggest issues in the 2018 elections that will determine whether the GOP retains its majorities in Congress.
The bill slashes the corporate tax rate to 21 percent from 35 percent, vaulting the U.S. into competition with other industrialized economies, which have an average corporate rate of 22.5 percent. It offers an array of temporary tax breaks for individuals and other types of businesses—including rate cuts that will tend to favor the highest earners and an increased standard deduction that benefits low- and middle-class workers.
The changes would reduce federal revenue by almost $1.5 trillion over the coming decade—before accounting for any economic growth that might result, according to Congress’s Joint Committee on Taxation, which analyzes tax legislation. Earlier versions were forecast to increase deficits by roughly $1 trillion even after accounting for growth.
On to Senate
The bill now heads to the Senate, where careful deal-making by GOP leaders over the past month is expected to assure its passage. Trump has promised to sign the bill—which would represent the only major legislative accomplishment that the GOP has gained since taking control of both the legislative and executive branches in January.
Tuesday’s vote was a triumph for Ryan, a Wisconsin Republican and self-described policy wonk who put aside his vision for a more comprehensive, cutting-edge—and controversial—approach to overhauling corporate taxes earlier this year. In the end, Ryan oversaw compromises that trimmed some personal deductions and settled for temporary individual tax relief to help cover the cost of the deep corporate tax cut.
“This is a long time in coming,” Ryan said Tuesday. “Fixing the tax code will help us get that 3 percent economy,” he said—meaning an economy that grows at the rate of 3 percent annually.
House Ways and Means Chairman Kevin Brady said before the vote that the changes will please people, not bureaucrats. “Because if you spend your money, they can’t,” said Brady. “Given a choice between the federal government and you, we choose you.”
In June, as the GOP Congress was slogging through an ultimately failed effort to repeal the 2010 Affordable Care Act—commonly known as Obamacare—Ryan predicted a more successful result for a tax bill, but one that would include elements of drama.
“You will hear that it is dead,” he said at the time. “Then you will hear that it is back on track. Then you will hear it is on life support. But I am here to tell you: We are going to get this done in 2017.”
Republicans have said their bill—the most sweeping tax-code rewrite since 1986—represents the culmination of a years-long effort to sort through policy prescriptions for a tax code that most observers say needs changes.
But in the end, the legislation succeeded after a rushed, secretive process that began in earnest only after the Senate gave up on its Obamacare-repeal efforts in September. A House bill first appeared on Nov. 2, kicking off a six-week sprint that was marked by marathon hearings, late-night votes, hasty rewrites of key provisions—and Democrats’ complaints about all of the above.
Various GOP leaders have defended the process, but Representative Jim McGovern, a Democratic member of the Rules Committee, disputed their description of regular order. He said Republicans can ram their bill through Congress with the majorities they have, but he railed against GOP claims that the bill was discussed in an open, transparent way.
“Please spare us the comments about the process,” McGovern said, “because the process is lousy.”
As an extra measure of satisfaction for Trump and congressional conservatives, the tax bill will dismantle a key piece of Obamacare: the individual mandate that requires people to purchase insurance. GOP leaders say the mandate’s penalty—$695 for individuals—falls disproportionately on lower- and middle-income people.
Repealing the mandate is estimated to generate roughly $300 billion over 10 years, helping to keep the tax bill from creating even larger potential deficits. But that comes along with roughly 13 million people—most of them young and healthy—dropping insurance coverage over that decade, according to the Congressional Budget Office’s estimate.
Protesters in the House’s public gallery interrupted the last floor speeches and a procedural vote Tuesday, yelling, “Kill the bill, don’t kill us!”
Some health economists say the change would lead to higher health-coverage premiums, perhaps canceling out the effect of the individual tax cuts for many. Some GOP lawmakers, including Senator Susan Collins of Maine, are seeking legislation to help stabilize the situation, but the fate of those efforts remains unclear.
One of the most controversial provisions in the bill will limit the individual deduction for state and local taxes to $10,000, a provision that will mostly affect people who make relatively high incomes in high-tax states that tend to vote Democratic. GOP lawmakers in New York, New Jersey and California have objected to the provision, saying it might hurt them politically.
Overall, the bill has failed to win broad popularity in public opinion polls—despite Trump’s repeated attempts to sell it as a boon for the middle class, half the public thinks they’ll pay higher taxes under the bill, according to a Monmouth University poll that was released Monday.
That’s not true, Ryan said Tuesday before the vote. “This is real relief, and people are going to see this in their paycheck before too long.”