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US Republicans scrambled to salvage their tax plan Thursday after it hit unexpected hurdles, with senators mulling adding future tax hikes into the overhaul as a means of maintaining sufficient revenue.
The tension marked an abrupt shift in the path that President Donald Trump’s tax plan had been taking in the Senate: his party had hoped to pass the controversial reform bill by as early as Thursday night, but it was decided no vote would happen before Friday midday.
Trump had been closing in on a major political victory with his tax cut package that would serve as his most significant legislative achievement to date.
But a tense standoff on the Senate floor threw the bill’s fate into question, after a new projection showed the measure would add $1 trillion to the federal deficit.
The analysis complicated Trump’s argument that the tax cuts for US corporations and individuals would pay for themselves through additional economic growth.
In a dramatic move, Republican senators Bob Corker, Jeff Flake and Ron Johnson refused to vote on a procedural measure until they were assured that more changes could be made to the legislation.
Republicans hold a narrow 52-48 Senate majority. Three defectors would kill the bill.
Corker, who has publicly criticized Trump in recent months, wants a ‘trigger’ inserted to raise taxes if revenues fall short of projections. But the parliamentarian told lawmakers that such a mechanism would not be allowed under Senate budget rules.
The three eventually voted to keep the bill alive, but the showdown highlighted the delicate balancing act Republicans were negotiating to get the tax plan across the finish line.
‘It doesn’t look like the trigger is going to work,’ number two Senate Republican John Cornyn told reporters afterward, according to US media.
Cornyn reportedly said one option for boosting revenue would be to begin raising the corporate tax rate after six years, perhaps at half a percentage point per year.
The bill as it stands would reduce the corporate rate from the current 35 percent to 20 percent. Trump has repeatedly called for a 20 percent corporate rate.
With the trigger hiccup, lawmakers were seeking new ways to circumvent the unexpected problem.
Senator Lindsey Graham felt ‘confident that if there’s a shortfall in the projections that there’ll be a mechanism in the bill to deal with the deficit,’ Roll Call quoted him as saying.
Economic boost?
The legislative psychodrama was shaping up in a way that mirrored Republican efforts this summer to dismantle the Obamacare health law: in a dramatic late-night vote, three Republican senators, including John McCain, torpedoed the repeal that Trump had promised during his election campaign.
McCain said Thursday he backs the tax plan, in part because it would bring relief to a financially strained middle class.
‘I believe this legislation, though far from perfect, would enhance American competitiveness, boost the economy, and provide long overdue tax relief for middle-class families,’ McCain said in a statement.
Some conservatives bridle at seeing their party trample the anti-deficit budget orthodoxy they preached during the Obama presidency: the bill before them would balloon the national deficit by $1.4 trillion over the coming decade, the Congressional Budget Office estimates.
Other senators have raised narrower concerns: over the tax rates for certain smaller companies; deductions for families with children; or a provision, slipped into the legislation, to end the requirement that all taxpayers carry health insurance or pay a fine – a central pillar of Obamacare.
If the legislation passes the Senate, it still must be reconciled with the recently passed House version. The plans differ on some points.
As Republican leaders scrambled to overcome final objections and lock down necessary votes, their essential argument was a simple one: if they fail to pass tax reform, they can expect major losses in next November’s midterm elections.
‘Screw them over’
Democrats, united in opposition, are arguing that the plan is too expensive and will accommodate only the rich.
Senator Mazie Hirono used some salty language to get the point across.
‘Rather than crafting a tax plan that would actually help middle-class families, Donald Trump and the Republican Party have decided to screw them over instead,’ the normally reserved Hawaiian said on the Senate floor.
Analyses suggest most people at all income levels will get immediate help from the tax cuts, but that the wealthiest five percent of households – including many Republican donors – will profit disproportionately.
The Joint Committee on Taxation projected Thursday that the plan’s economic bump would translate into $407 billion in increased revenues over 10 years.
But that would only partially offset the conventional projection of $1.414 trillion in lost revenue, leaving a $1 trillion deficit hike.