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House approves GOP tax overhaul, with Senate outlook uncertain

Speaker of the House Paul Ryan, R-Wis., (center) and House Republicans released a fiscal year 2018 budget that would increase military spending and cut other discretionary spending. Chip Somodevilla/Getty Images

The House has narrowly approved a $1.4 trillion tax overhaul, clearing the first major hurdle in Republican attempts to cut taxes and rewrite the tax code.

The vote was almost along party lines, with no Democrats voting in support of the bill and some GOP defections over provisions in the measure that would eliminate important tax deductions taken by constituents in some high tax states, like California.

Reps. Ken Calvert (R-Corona) and Duncan Hunter (R-Lakeside) were among the Southern California Republicans voting in favor of the bill. Three others who voted yes — Mimi Walters (R-Laguna Niguel), Ed Royce (R-Fullerton) and Steve Knight (R-Palmdale) — are considered vulnerable in 2018.

Walters, Royce and Knight supported the bill even though their districts voted for Hilary Clinton in last year’s presidential election, putting them on the Democratic party’s list of targeted seats. Each of them have a lot of constituents who use the state and local income deduction, which would be eliminated under the House legislation.

In Walters’ district, 46 percent of taxpayers took the state and local tax deduction in 2014, according to a recent analysis from the Tax Policy Center. That figure is above 40 percent in Royce’s and Knight’s districts as well.

In statements, Knight and Royce called the current tax system burdensome and said that the House bill would spark economic growth.

"While this bill is not perfect, it’s a good first step," said Royce. "I’m committed to ensuring that the final product works for all Californians, especially for those who need it most."

Walters said in a statement that the bill would provide "much needed relief" to Orange County’s middle class residents. She also said she got "a personal commitment" from Kevin Brady (R-TX), chairman of the House Ways and Means Committee, that "changes will be made to the final version of tax reform to benefit Orange County residents."

Rep. Darrell Issa (R-Vista) was among 13 House Republicans who voted against the tax bill. Issa, whose district spans San Diego and Orange counties, said in a statement that it was "disappointing that the bill approved today will not provide the same tax relief to Californians as it does to the rest of the nation."

He blamed Democrats in Sacramento for the high state taxes that Californians would no longer be able to deduct if the House bill becomes law. 

Dana Rohrabacher (R-Costa Mesa), who represents coastal Orange County, also voted against the bill. He expressed similar sentiments in a statement Thursday. 

"In every election, I have run as the low-tax candidate looking out for the interests of my constituents," the statement read. "I had to walk away today from my fellow Republicans whose districts are different from mine to be true to that promise."

Rohrabacher also blamed Democratic state leaders for California’s high tax burden. 

Issa and Rohrabacher are both considered highly susceptible to losing their seats to a Democratic candidate in 2018. Voting against the federal tax overhaul was likely a safe bet for the two vulnerable incumbents, said Raphe Sonenshein, executive director of the Pat Brown Institute at Cal State Los Angeles. 

He pointed to recent polls showing that voters increasingly disapprove of the Republicans' tax overhaul bill as it currently stands. 

Because of the Republican party’s significant majority in the House, it didn’t need the votes of Issa and Rohrabacher to pass the bill and therefore may have given them a pass, Sonenshein said.

"Invariably, when you have a large majority in the House, you don’t make everybody walk the plank," he said. "A rational party puts the least pressure on the most pressured incumbents." 

Democrats need to win 24 seats currently held by Republicans to retake the House of Representatives next year.

"It has been 31 years since we last did this, and it is finally time that we get the general interest of this country to prevail over the special interests in Washington," House Speaker Paul Ryan said on the House floor, pledging that the bill would leader to faster economic growth and bigger paychecks for American workers.

The last major tax overhaul took place in 1986 under President Ronald Reagan, with a Republican-controlled Senate and Democratic-controlled House.

President Trump made a rare appearance at the Capitol to rally GOP lawmakers in advance of the vote. "It was a good meeting. Taxes are going really well," Trump told reporters.

The 440-page legislation would reduce the corporate tax rate from 35 percent to 20 percent, winning support from outside groups such as the U.S. Chamber of Commerce and the National Federation of Independent Businesses.

But its effect on individuals is less dramatic. It reduces from seven to four the number of tax brackets, and doubles the standard deduction, while eliminating many other deductions and credits. NPR's Danielle Kurtzleben has an extensive breakdown of the of the measure here.

The Senate is considering its own, different tax overhaul, which is still in committee. In recent days, it has been altered so that tax rates for individuals would be reduced only temporarily, while corporate tax rates would be cut permanently. Wisconsin Sen. Ron Johnson said he's against the bill in its current form because the cuts that would be temporary would also impact small businesses that pay their taxes through individual rates.

The Senate bill would also now include a provision to zero-out the individual mandate penalty, one of the pillars of the Affordable Care Act. Sen. Susan Collins, R-Maine, expressed reservations over this move. She is one of the Republicans who blocked efforts to repeal Obamacare this year.

GOP leaders, prodded by the president, hope to agree on and approve a final tax bill by the end of the year, and show voters a major accomplishment in the first year of their majority since they failed repeatedly on health care.