Senate Majority Leader Mitch McConnell (R-Ky.) was getting impatient.
He had tasked Sens. Bob Corker (R-Tenn.) and Pat Toomey (R-Pa.) with striking a deal on the budget so that tax reform could move forward.
After weeks of negotiation between Corker and Toomey, McConnell summoned the two members of the Budget Committee into a meeting in his Capitol office.
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“At a certain point, I think Sen. McConnell realized he probably needed to convene a meeting with just the three of us,” Toomey said. “He basically said, ‘OK guys, you’ve been at it for many weeks. We really need a resolution here. Where are we?’ ”
For the tax bill, this was a crucial moment. Republicans needed to clear a budget resolution in order to later pass tax reform with just 51 votes as opposed to the customary 60. Corker, who had repeatedly clashed with President Trump publicly in 2017, was a key vote in the narrowly divided Senate and a swing vote on the Budget panel.
This is part three of a seven-part series on how Trump’s tax law passed Congress and how it is playing out in the battle for Congress in the midterm 2018 election.
(Part One: Breaking the gridlock)
For years, Republicans had vowed to pass a revenue-neutral tax-cut bill, citing concern about the nation’s escalating debt levels. But in the fall of 2017, more Republicans were warming to the argument that tax laws would be paid for by economic growth.
“I was absolutely convinced that we would not have tax reform worthy of the name if we held ourselves to that standard,” Toomey said of revenue neutrality. “If we put ourselves in that box, the math just didn’t work.”
Toomey argued that limiting the size of tax cuts to an amount covered by eliminating various loopholes and tax breaks would produce a paltry plan.
The proposed strategy to have a net tax cut caused problems, for Corker had said the debt was a greater threat to the United States than North Korea and that he wouldn’t back any tax cut measure if it added “one penny to the deficit.”
“Toomey is viewed as a supply sider, and I’m viewed as a deficit hawk, and so the reason McConnell put the two of us together was, if we could get an agreement, as it relates to issues like this, it brought together two wings of the party,” said Corker.
A deal is reached
In initial meetings, Toomey pushed for a $2.5 trillion tax cut spread over the course of 10 years, some four times larger than the 2009 economic stimulus package pushed by then-President Obama.
While Corker balked at the figure, he said he was open to leaving significant “wiggle room” to allow the process to move forward, and to paper over differences with House rules. In Corker’s thinking, the final figure in the budget resolution would seem inflated because it wouldn’t account for the same level of economic growth that Republicans believed would follow the tax cuts, nor expected policy changes that weren’t yet put into law.
In a meeting with McConnell and Toomey, Corker agreed to a $1.5 trillion deficit allowance in the budget resolution.
Corker said he was concerned that if the GOP conference agreed to a revenue-negative tax bill there would be tremendous pressure to lower rates without reforming the code by broadening the base and wiping out preferences.
(Part Two: Dealing with a health care hangover)
Toomey made a proposal to Corker, who announced in September 2017 that he would not be seeking reelection.
“Why don’t you vote for the budget resolution because that’s the mechanism that we need to give us reconciliation instructions,” he said to his colleague. “If the Finance Committee doesn’t produce the product that you want, you can vote against it.”
Corker replied, “I absolutely will [vote ‘no’] if you guys take the easy way out and just slash rates.”
Toomey acknowledged that GOP leaders wanted to finish the tax bill by the end of 2017 so that voters would see its benefits in the upcoming midterm election year.
“That was part of it,” Toomey said.
But he added there was also concern that if the package hung out there too long, it would collapse under its own weight.
“Probably the bigger part, honestly, was just the idea that a very big, sweeping, ambitious piece of legislation that affects everyone, the longer it delays and hangs out there, the more people start tearing it apart, taking potshots,” he said. “It becomes harder to get it done the longer it lingers.”
Corker voted for the resolution in the Budget Committee and the measure cleared the panel, 12-11.
House Republicans from blue states revolt
House Republican leaders faced a huge challenge.
They needed to get members of their caucus from blue states on board with a tax bill that would take aim at a tax break popular with their constituents.
Speaker Paul Ryan’s (R-Wis.) 2016 blueprint proposed completely eliminating the state and local tax (SALT) deduction. Doing so would help raise revenue that could be used to lower tax rates. And many Republicans view the deduction as subsidizing high state taxes in Democratic areas.
But there are still a number of GOP House members in states where taxpayers rely on the deduction, such as New York, New Jersey, California and Illinois. And some of those lawmakers, especially those facing tough reelection races, put up a fight.
Tensions escalated as the House prepared to vote on a budget resolution. When the House voted on the Senate’s budget resolution during the negotiations over SALT, almost every Republican from New York and New Jersey voted against it.
Also joining the fight to preserve SALT were Democratic lawmakers, state and local politicians — such as New York Gov. Andrew Cuomo (D), who brought up the issue with Trump before his inauguration — and groups in the housing sector.
A senior Trump administration official said there was “a lot of friction with moderates in the Northeast. With SALT, it was a full-court press.”
“The SALT piece was dicey,” another administration official said.
Discussions get ‘heated’
House Ways and Means Committee Chairman Kevin Brady (R-Texas), House Majority Leader Kevin McCarthy (R-Calif.) and House Majority Whip Steve Scalise (R-La.) held a slew of meetings with GOP lawmakers from high-tax states.
“Some of them were a little heated, and I think those members wanted to make a point that this is a problem that had to be addressed,” Scalise said.
Brady called the meetings “constructive.”
“Lawmakers from states that tax so heavily, they recognize their states just brutally tax families and businesses,” he said. “But they wanted to make sure that their states and communities benefit from tax reform as well.”
Besides Brady, Scalise and McCarthy, there were others who were also instrumental in keeping enough SALT Republicans on board, such as Rep. Tom Reed, a Ways and Means member from New York, and Rep. Peter Roskam (R-Ill.), who at the time was chairman of the Ways and Means tax-policy subcommittee.
Reed, a co-chairman of the bipartisan Problem Solvers Caucus, engaged in shuttle diplomacy as he shuffled back and forth between the offices of leadership, Brady and fellow SALT-area lawmakers.
Reed initially tried to convince leadership to replace the deduction with a tax credit. But GOP leaders said their hands were tied because of the tax framework outlined in Ryan’s “Better Way” agenda, which completely eliminated SALT.
“Politically, it’s not going to fly,” McCarthy told Reed.
Then the negotiating became all about the number for the deduction, with Reed fighting for a cap as high as $20,000. Eventually, House negotiators settled on a $10,000 deduction for just property taxes. That was revised to a $10,000 cap on the whole SALT deduction during the conference committee discussions to appease Republican lawmakers in California, where property taxes aren’t very high but income taxes are.
Treasury Secretary Steven Mnuchin said there were “lots of tweaks to that provision … Maintaining the $10,000 deduction was critical.”
With a deal struck, the Trump White House and House GOP leaders stepped up their whipping operation. Administration officials, including Trump, Vice President Pence, Mnuchin, National Economic Council Director Gary Cohn and White House adviser Ivanka Trump urged members from SALT states to vote “yes.” Mnuchin and Ivanka Trump boarded an Amtrak train to appear with Rep. Tom MacArthur (R-N.J.) in his district.
McCarthy played a key role in holding the California delegation together. Using his weekly meetings with GOP members from the Golden State to discuss challenges, he was able to walk lawmakers through what he thought they could get.
“Kevin McCarthy did yeoman’s work with California members on that issue, keeping them calm and focused on the bigger prize,” Reed said.
Using data collected from the IRS, GOP leaders were able to show members how different income levels would be affected. In the end, leaders told their members, your constituents will put more money in their pockets.
McCarthy said seeing the data eased the majority of SALT members’ concerns and helped arm them with facts ahead of town hall meetings.
On the day of the final House vote in December, GOP leaders weren’t sweating. Unlike in the Senate, they had more margin for error and the bill comfortably cleared the lower chamber. A dozen GOP House members voted against the tax bill, with 11 of them from New York, New Jersey and California.
Members of The Hill’s staff who have worked on this tax reform series over the past several months are Alexander Bolton, Juliegrace Brufke, Timothy Cama, Jordain Carney, Bob Cusack, Niv Elis, Naomi Jagoda, Mike Lillis, Peter Sullivan, Megan R. Wilson and Melanie Zanona.
Thursday: Bipartisanship not an ingredient