US: Tax Deal Possible by End of Next Week

Published on December 1, 2017
SGH Insight
Events are moving very quickly in the Senate in the last few hours that are pointing to likely passage of the Senate tax cut bill late tonight.

*** A crucial concession won by Maine Republican Senator Susan Collins just in the last hour, to put the state and local tax deduction back into the Senate tax bill, is not only key to its probable Senate passage with 51 likely (but at least the minimal 50) Republican votes later today, but it may also smooth the way to a very fast vote by the conference committee that will be tightly controlled by Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan. ***

*** The Republican leadership is pressing to get the tax cut legislation to a conference vote as soon as the end of next week, ideally before the current FY2018 Continuing Resolution expires on Friday, December 8, and certainly before the special Alabama Senate election on December 12. If so, the “Tax Cut and Jobs Act of 2017” could go to President Trump for his signature into law by mid-December. ***
Market Validation
(Reuters 12/4/17)

The dollar jumped on Monday versus the currencies of most other developed and emerging nations while Treasury yields rose and Wall Street was primed for a another record-setting day after the U.S. Senate voted to approve a wide-ranging tax overhaul.

Markets reacted broadly to the Senate’s approval on Saturday for the biggest tax law change since the 1980s, taking President Donald Trump closer to his goal of slashing levies on businesses.

European stocks rose more than one percent on average , with German stocks outperforming with a 1.4 percent surge, in anticipation of a strong New York session - futures for the Dow Jones, S&P 500 and Nasdaq indexes rallied as much as 0.9 percent .

Events are moving very quickly in the Senate in the last few hours that are pointing to likely passage of the Senate tax cut bill late tonight.

*** A crucial concession won by Maine Republican Senator Susan Collins just in the last hour, to put the state and local tax deduction back into the Senate tax bill, is not only key to its probable Senate passage with 51 likely (but at least the minimal 50) Republican votes later today, but it may also smooth the way to a very fast vote by the conference committee that will be tightly controlled by Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan. ***

*** The Republican leadership is pressing to get the tax cut legislation to a conference vote as soon as the end of next week, ideally before the current FY2018 Continuing Resolution expires on Friday, December 8, and certainly before the special Alabama Senate election on December 12. If so, the “Tax Cut and Jobs Act of 2017” could go to President Trump for his signature into law by mid-December. ***

What a remarkable last few hours:

** Senate Majority Leader McConnell is now confident enough he has the necessary 50 votes for Senate amendment to the House bill, H.R.1 that he can go to a procedural vote this afternoon. It would then be followed by hours of a “vote-a-rama” of voting on various amendments before a final vote some time later tonight. The next step is to put the House bill H.R.1 and the Senate amendment to that bill to a House-Senate Conference Committee to resolve all differences and report back a unified bill for passage by each chamber.

** The conference committee, whose members are selected by McConnell and Speaker Ryan and drawn largely from the Senate Finance and House Ways and Means Committees, could start its work to square the differences in the House and Senate versions as soon as Monday or Tuesday next week. Democrats are also on the committee, but are not expected to have much sway in the debates that will be tightly managed by McConnell and Ryan.

** The objections by Republican dissenters Bob Corker of Tennessee and Arizona’s Jeff Flake collapsed earlier today after the setback to the bill’s progress last night because neither had legislative language ready for an alternative pay-for once the so-called “trigger mechanism” was tossed aside by the Senate parliamentarian.

** In contrast, Republican Senator Collins of Maine went into her negotiations with McConnell, Senate Finance Committee Chairman Orrin Hatch, and White House NEC Chairman Gary Cohn with her legislative language in hand, including a pay-for, which made it far easier to be adopted with the enormous time pressure to keep the bill moving forward before the weekend.

** The Collins concession was especially important because it removed one of the key differences in the Senate and House versions. It was essential to the House Republican leadership to jettison the Senate language removing the SALT deductions for fear Republicans in blue or purple state suburban districts could lose their seats and the GOP thus lose control of the House.

** For the most part now, much of the work in conference will be less about political horse-trading and more about control over the statutory language. That is why the staff work this weekend in preparation will be so crucial, and why in fact, because the Senate bill was so rushed, technical revisions to clarify the statutory language may be necessary. It will require floor votes in each Chamber again, but none are expected to derail or delay the tax cut bill.

** The headlines about former National Security Advisor Michael Flynn in which he was purported to have received instructions from then presidential candidate Donald Trump, since corrected to senior members of the transition team, on his discussions with Russian officials are not expected to seriously disrupt the momentum behind the tax cut bill. The Mueller investigation will dominate the chatter on Capitol Hill, but will not slow its work. Indeed, work might just become the favorite distraction on both sides of the aisle.

Back to list