Trump poised for tax boost as Senate passes key bill

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The US Senate narrowly passed the Republican tax bill in the early hours of Wednesday morning, but celebrations were on hold in the White House due to a delay in the legislation hitting the president’s desk.

The Senate voted 51-48 – with no Democratic support – to approve the landmark legislation, which is also President Donald Trump’s last chance of passing a major law this year and an issue set to feature heavily in the 2018 midterm elections.

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However, a revote in the House of Representatives means another delay before the president can sign the bill. On Tuesday afternoon, the House passed the bill 227-203 and sent it to the Senate – but three provisions did not comply with Senate rules.

The Senate passed the legislation without the provisions, with all Republicans other than John McCain, who is recovering from chemotherapy, voting in favor. The House is expected to approve the bill on Wednesday.

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The delay was a gift for the Democrats, who have argued that the legislation – which increases the deficit by 1.5 trillion US dollars – is being rushed through without proper debate or planning.

Democratic Senate Minority Leader Chuck Schumer said the passage of the bill "taught us about how not to legislate", and condemned the legislation as "sloppy" and "partisan."

Why is it politically important?

The Republicans have hailed the bill as a major legislative victory ahead of the 2018 midterm elections, after a year of disappointments, most notably over healthcare reform.

Democrats claim the legislation is designed to benefit businesses and wealthy individuals like the president, while Trump counters that it will create jobs and boost the American economy. By not voting for the bill, Democrats will be accused by Republicans of supporting high taxes on middle-earners.

Senate Majority Leader Mitch McConnell, accompanied by members of the Republican Conference, speaks at a news conference at the US Capitol in Washington, US, December 20, 2017. /Reuters Photo

Speaking after the Senate vote, Senate Majority Leader Mitch McConnell said, "If we can’t sell this to the American people, we should go into another line of work."

Polling suggests the bill is unusually unpopular for a tax cut and although the Democrats failed to defeat the legislation, politicians including Schumer are casting a narrative that the bill is squarely for the rich and big business.

A Monmouth University poll released on Monday indicated that nearly half of Americans disapprove of the legislation. Forty-seven percent of those surveyed said they disapprove of the similar bills previously passed by the House and Senate, and only 26 percent of respondents said they approve.

Republicans – despite misgivings about increasing the deficit – argue that although the measures don’t currently have strong support, favorability will rise once Americans see an impact in their pay slips and the economy grows.

Republican Speaker of the House Paul Ryan on Capitol Hill in Washington, US, December 19, 2017. /Reuters Photo

The Republicans argue that tax breaks for big business will lead to more investment, higher wages and more jobs; the Democrats say the cuts will be used for share buybacks and bigger dividends, benefiting only shareholders. The stock market has risen sharply on expectation of the bill being passed.

The bill also repeals the Obamacare mandate, meaning Americans will not be fined for not taking out health insurance. This has huge repercussions for affordability of the Obamacare system, and will likely result in fresh efforts to fully repeal the healthcare reform in 2018.

What’s in the tax bill?

Debt

- US deficit expanded and an estimated 1.5 trillion US dollars added to debt over 10 years.

Individuals

－ Top personal tax rate drops from 39.6 percent to 37 percent and threshold rises.

－ Temporarily lowers or maintains rates in all seven tax brackets and raises thresholds.

－ Standard deduction nearly doubled, so itemizing tax deductions ends for many.

－ Child tax credit doubled, many other deductions scrapped.

－ Exemption from estate tax increased to 10 million US dollars per individual.

Business

－ Corporate tax simplified to a flat 21 percent corporate rate (top rate currently 35 percent).

－ Multinational companies will not be taxed on overseas profits as part of a territorial system, but face a one-off repatriation tax on profits currently held overseas.

－ Creates a 20 percent deduction for the first 315,000 US dollars of qualified business income for joint filers of pass-through businesses, notably benefiting commercial property firms.

Obamacare

－ Repeals the Obamacare mandate, so people will not be fined for not taking out health insurance.

What's next?

The House is expected to pass the tax bill later on Wednesday, and the White House has scheduled a news conference and celebratory event for Republican lawmakers in the afternoon.

The Republicans had set a deadline of making the bill law before the end of 2017, so Trump will probably sign the legislation as early as Wednesday.

Arguments over the consequences of the bill are far from over, and will likely frame the campaigning ahead of the 2018 midterms.

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