US Debt Limit Nail-Biter Looms as Senate Ponders Trump Tax Bill

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A group of Republicans wants to increase the price-tag of the bill by making temporary business tax breaks in the House legislation permanent. At the same time, deficit hawks like Senator Ron Johnson of Wisconsin are demanding larger spending cuts that moderates in the party oppose. 

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And some senators object to provisions in the House bill that quickly end clean energy tax breaks, a rollback that hurts not only renewable energy companies but the banks backing current projects. 

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“I think we’re going to be looking to how we can perhaps have more realistic phase-out” of clean electricity credits, said Senator Lisa Murkowski, an Alaska Republican.

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The Senate is using a budget gimmick to allow $1.3 trillion more in tax cuts than the House bill. That could antagonize fiscal hawks in the House already upset by the extra debt burden in the bill they just approved.

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Other senators like West Virginia’s Jim Justice want a permanent tax cut on tips and overtime, which only lasts four years in the bill now, while scaling back changes to the Medicaid provider tax that could hurt his state’s budget.

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“I’m sure a lot of stuff will change,” said Senator Josh Hawley of Missouri. “I know a lot of my colleagues have a lot of ideas about things to change.”

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Hawley told reporters he would push to include a provision increasing taxes on carried interest which is used by private equity, venture capitalists and real estate partners. 

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Hawley also wants a higher child tax credit than the $2,500 maximum in the House bill.

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That change will cost money, which in turn will escalate demands for more spending cuts. 

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Johnson, the Wisconsin deficit hawk, also wants to pick a fight with a group of House Republicans from high-tax states such as New York, New Jersey and California, who only agreed to support the tax bill after winning a higher limit on the deduction for state and local taxes. The SALT lawmakers had otherwise threatened to block the legislation.

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Johnson has vowed to strip out the concession they won, which raises the SALT limit to $40,000 from the current $10,000.  House leaders have said the SALT provision is crucial to getting the bill through their chamber. 

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Asked if he is likely to be ignored by his party’s Senate leaders, Johnson said he doubted they would have the votes to pass the bill without him. “If they got them, God bless them,” he said.

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Democrats will be largely sidelined in the Republican-only budget bill process. Nonetheless they will have the ability to use the Senate rules to strike non-fiscal provisions from the bill. These likely include provisions like the deregulation of gun silencers and a block on state regulation of artificial intelligence in the House bill. The litigation of those provisions will likely take weeks. 

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“We are pulling out all the stops,” said Senator Ron Wyden, an Oregon Democrat. “That bill is stuffed full of policy which is not allowed under the rules.”

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