US Senate Majority Leader Mitch McConnell walks to the Senate floor as debate wraps up over the Republican tax reform plan in Washington. (Reuters Photo)
WASHINGTON: The US Senate has approved a sweeping tax overhaul, moving Republicans and President Donald Trump a major step closer to their goal of slashing taxes for businesses and the rich while offering everyday Americans a mixed bag of changes.
In what would be the largest US tax overhaul since the 1980s, Republicans want to add $1.4 trillion over 10 years to the $20-trillion national debt to finance changes that they say would further boost an already growing economy.
US stock markets have rallied for months in hopes that Washington would provide significant tax cuts for corporations.
Following the 51-49 vote early Saturday morning, talks will begin, likely this coming week, between the Senate and the House of Representatives, which has already approved its own tax bill. The two chambers must craft a single bill to send to Trump to sign into law.
The president wants that to happen before the end of the year, allowing him and his Republicans to score their first major legislative achievement of 2017, despite controlling the White House, the Senate and the House since he took office in January.
A tax overhaul is seen by Republicans as crucial to their prospects in the November 2018 mid-term election campaigns when they will have to defend their majorities in Congress.
Both the House and Senate bills would cut the corporate tax rate to 20% from 35% — though the Senate version would set that lower rate in 2019, a year later than the House bill would.
Also, the Senate bill, unlike the House version, would provide only temporary tax relief to individuals, ending tax cuts for them in 2026.
Senator Bob Corker of Tennessee, who had cited concerns over the bill’s effects on federal deficits, was the only Republican dissenter.
The House and Senate bills also align on the contentious issue of individual deductions for state and local taxes: They’d eliminate all but a deduction for property taxes, which would be capped at $10,000.
The House bill would also eliminate the estate tax, while the Senate version would limit the tax to fewer multimillion-dollar estates, but leave it in place. And after 2025, the limits would lift.
CRAFTED IN SECRET
In a legislative battle that moved so fast that a final draft of the bill was unavailable to the public until just hours before the vote, Democrats slammed the measure as a give-away to businesses and the rich financed with billions of dollars in taxpayer debt.
The framework for both the Senate and House bills was developed in secret over a few months by a half-dozen Republican congressional leaders and Trump advisers, with little input from the party’s rank-and-file and none from Democrats.
The Senate approved their bill just before 2am local time Saturday, with Democrats complaining that last-minute amendments circulated among senators were poorly drafted and vulnerable to being gamed later by lawyers and accountants in the tax avoidance industry.
“The Republicans have managed to take a bad bill and make it worse,” said Senate Democratic leader Chuck Schumer. “Under the cover of darkness and with the aid of haste, a flurry of last-minute changes will stuff even more money into the pockets of the wealthy and the biggest corporations.”
No Democrats voted for the bill, but they lacked the votes to block it because Republicans hold a 52-48 Senate majority.
Republican Senator Bill Cassidy praised the bill and said, “Working families and middle-income families across the nation will be better off. Families who over the last eight years have not done well will begin to do better.”
The sweeping tax overhaul also contains the Republicans’ biggest blow yet to former President Barack Obama’s healthcare law, repealing the requirement that all Americans obtain health insurance.
The individual mandate is meant to ensure a viable health insurance market by forcing younger and healthier Americans to buy coverage.
Removing it while keeping the rest of Obama’s Affordable Care Act intact is expected to cause insurance premiums to rise and lead to millions of people losing coverage, policy experts say.
“It’s going to take a bunch of healthy people out of the insurance market,” said Craig Garthwaite, director of the healthcare programme at Northwestern University’s Kellogg School of Management.