House Republican tax writers effectively gutted a proposal to tax U.S. companies’ payments to related foreign affiliates, part of a package of late changes on Monday that punched a $74 billion revenue hole in their tax overhaul plan, according to a preliminary estimate from Congress’s Joint Committee on Taxation.
The change leaves House Ways and Means Chairman Kevin Brady searching for new ways to offset the bill’s tax cuts in order to keep the legislation in line with Congress’s 2018 budget resolution and avoid the threat of a Democratic filibuster in the Senate that could kill it.
The panel voted late Monday to approve a group of changes that Brady said “better tailors” provisions aimed at preventing companies from shifting their earnings offshore to avoid U.S. taxes. As a result, the revenue from a proposed 20% excise tax on certain corporate payments to related offshore affiliates dropped to about $6.5 billion from $154.5 billion earlier, the JCT found.
The excise tax proposal had stirred concern among various tax experts. One called it “the atomic bomb in the draft.”
By changing that provision and others, the committee increased the 10-year deficit that the tax bill would produce by $160.7 billion, to $1.57 trillion. Congress has approved a 2018 budget resolution that capped any deficit spending at $1.5 trillion. The JCT document surfaced Tuesday evening.
Meanwhile, after fiery clashes on the first day of its tax bill markup, the Ways and Means Committee ended a relatively quiet Tuesday with Republicans voting down a swath of Democratic-led amendments designed to box them in politically.
The proposed amendments included calling for limiting the debt increase under the tax bill after the second year, restoring the state and local tax deduction, and ending the SALT deduction for businesses (Democrats argued that if individuals can use it, it’s unfair to allow businesses to). Other proposals sought to raise the corporate tax rate enough to achieve revenue neutrality under the bill, preserve the Work Opportunity Tax Credit for employers who hire veterans and restore the adoption tax credit.