House passes its tax reform plan as Senate version comes under new attack

House Republicans approved their sweeping tax-cut package Thursday, setting up a showdown with the Senate, where Republicans are struggling to win support for their own significantly different approach.

Senate GOP leaders, after making some revisions this week, are facing mounting dissent and criticism that their tax plan favors corporations and the wealthy. An analysis by Congress' bipartisan tax experts on Thursday concluded the Senate plan would raise taxes for some of the poorest Americans by 2021.

House Republicans had an easier time, passing their measure by a vote of 227 to 205, though 13 Republicans voted no.

Democrats were unified against the plan, and the Republican defections came from lawmakers in the Northeast and California, who were mostly concerned about the proposed elimination of deductions for state and local income taxes, and the capping of property tax deductions at $10,000. The write-offs are widely used in their high-tax districts.

Three California Republicans — Darrell Issa of Vista, Tom McClintock of Elk Grove and Dana Rohrabacher of Costa Mesa — were among those who voted against the bill. “I believe this bill could be made better,” Issa said ahead of the vote. McClintock this week urged his colleagues to “leave no taxpayer behind.”

Californians would also be hard hit by the House plan’s limits on mortgage interest deductions. After the vote, House Majority Leader Kevin McCarthy told reporters he was working on revisions to improve the bill for California taxpayers, when it undergoes changes to reconcile with whatever the Senate passes.

“You’ll see some changes that would come for California and others, and I think you’ll see more people vote for it,” the Bakersfield Republican said.

Ahead of the House vote, President Trump traveled to Capitol Hill to bolster Republicans worried that if they didn’t pass tax reform, they would risk voter revolt in next year’s midterm election for failing to keep a major campaign promise, particularly after their failed Obamacare repeal.

Trump assured House Republicans that he was behind their effort. The White House has so far expressed no preference for either the House or Senate version.

Rather than a hard sell, the president emphasized the historic nature of what they were trying to accomplish. Though the Obamacare effort stalled amid opposition from a handful of Senate Republicans, he predicted that senators currently voicing skepticism about the tax reform bill would “come around.”

“I love you,” Trump told them, according to those who attended the private meeting. “Go vote!”

House leaders celebrated the vote.

“Passing this bill is the single biggest thing we can do to grow the economy, restore opportunity and help these middle-income families that are struggling,” said House Speaker Paul D. Ryan (R-Wis.).

But approval sets Republicans in the House and Senate on a collision course as they rush to finish the package by Christmas.

The Senate plan has key differences and is facing greater hurdles for passage, particularly as senators try to find ways to enhance benefits for middle-income Americans.

Sen. Ron Johnson (R-Wis.) became the first GOP senator to oppose the proposal, saying it did not do enough to help small businesses. Centrist Sen. Susan Collins (R-Maine) has also raised concerns, as have other senators. Under special budget rules, Republicans can only afford to lose two votes in the Senate, assuming all Democrats vote against their plan.

Concerns were only heightened by a report Thursday from the nonpartisan Joint Committee on Taxation that estimated many low-income earners would end up with tax increases, not tax breaks, in the latest Senate plan.

Those making between $10,000 and $30,000 a year would pay more in taxes starting in 2021, the committee found. By 2023, people with incomes less than $10,000 also would see tax increases.

All other income categories — including those earning more than $1 million a year — would see tax decreases, according to the report.

But in 2027, taxes would go up for every income group under $75,000 because the Senate Republican bill calls for tax cuts and other changes to the individual code to expire at the end of 2025.

The large cut in the corporate tax rate, to 20% from 35%, would be permanent under the Republican bill.

Sen. Ron Wyden (D-Ore.) called the report "jaw-dropping news."

But Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) noted that the projections for low-income people were based on a provision of the Senate bill that does away with the Obamacare mandate that all Americans have health insurance.

If low-income earners opt to drop their healthcare coverage as a result, they would also no longer receive the Affordable Care Act's federal subsidies for their premiums. Without those subsidies, which act like tax credits, their taxes would effectively go up.

But Hatch said it was unfair to call that a tax increase. "Anyone who says we’re hiking taxes on low-income families is misstating the facts," he said.

The findings put the bill’s prospects in the Senate further in flux. Even so, the Senate Finance Committee voted 14 to 12 along party lines to approve the measure late Thursday. A full Senate vote is not expected until after Thanksgiving.

Democrats criticized the package, saying it guts essential tax breaks to give corporations and the wealthy tax cuts.

The House bill ends student loan interest deductions and medical expense deductions, and caps the mortgage interest deduction to loans of $500,000, repealing the write-off for second homes.

House Minority Leader Nancy Pelosi said the GOP plan “preys on the middle class.”

In a last-ditch gamble to raise revenue, Senate Republicans attached the partial Obamacare repeal, eliminating the tax imposed by the Affordable Care Act’s mandate that all Americans have insurance.

That change, which would go into effect in 2019, is expected to leave 13 million more Americans uninsured and drive up premium costs by 10%. But it brings in $318 billion over the decade by cutting federal healthcare subsidies to middle- and low-income Americans who chose not to buy insurance.

“Is this a country that kicks people off of their health coverage to cut taxes for the top 1%?” asked Sen. Dianne Feinstein (D-Calif.).

Even though Trump broke with House Republicans this year, calling their version of the Obamacare overhaul “mean” shortly after he pushed them to pass it, lawmakers did not raise those concerns in Thursday’s meeting. Many posed for selfies with the president afterward, posting their snapshots on social media.

Rep. Mark Meadows (R-N.C.), chairman of the House Freedom Caucus and a go-between for congressional Republicans and the White House, said he was confident Trump had their back this time.

“He gave me his word,” Meadows said.

lisa.mascaro@latimes.com

@LisaMascaro

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UPDATES:

7:20 p.m.: This article was updated with the Senate Finance Committee vote to approve the tax bill.

2:55 p.m.: This article was updated with additional analysis and background.

11:25 a.m.: This article was updated with additional details about the vote and the tax study.

10:50 a.m.: This article was updated with the House vote.

8:50 a.m.: This article was updated with President Trump arriving at the Capitol.

This article was originally published at 8:20 a.m.

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