Election results could give Democrats new clout on tax overhaul

Republican members of the House Ways and Means Committee, from left, Rep. Tom Reed, R-NY, Rep. Mike Kelly, R-Pa., Rep. Jim Renacci, R-Ohio, and Rep. Pat Meehan, R-Pa., with Rep. Diane Black, R-Tenn., at top, work on the markup of the GOP's far-reaching tax overhaul.
Republican members of the House Ways and Means Committee, from left, Rep. Tom Reed, R-NY, Rep. Mike Kelly, R-Pa., Rep. Jim Renacci, R-Ohio, and Rep. Pat Meehan, R-Pa., with Rep. Diane Black, R-Tenn., at top, work on the markup of the GOP's far-reaching tax overhaul. AP

As Senate Republicans prepare to unveil their tax overhaul plan Thursday, they insist the political climate hasn’t changed, even after Democrats' big election night on Tuesday.

Democrats have a different take. As the GOP legislation threatens to end many breaks for state and local taxes, mortgage interest deductions and more, Democratic lawmakers see new momentum for offering alternatives more in line with what they think voters want.

They see all sorts of encouraging signs. The Republican-led House Ways and Means committee has spent the week debating its tax reform bill, and has taken a pummeling in some corporate and consumer circles.

Even some GOP members were saying they couldn’t support the bill as currently written. Rep. Darrell Issa, R-Calif., one of the most vulnerable House Republicans in next year’s election, said he feared his constituents could see a tax increase.

Add to that news that hits politicians hardest: Election results. Senate Democratic Leader Chuck Schumer of New York said Wednesday the party’s victories in Virginia, New Jersey and elsewhere Tuesday “should be a giant stop sign” for the Republican tax plan.

He charged that the House bill “clobbers” the middle class, particularly in the suburbs because it caps property tax deductions at $10,000 and eliminates deductions for state and local income or sales taxes.

Keeping that low threshold would be politically lethal for Republican incumbents in swing districts, said Schumer, describing them as “already in trouble because the suburbs don’t seem to like Donald Trump.”

Signs are emerging that GOP senators are getting the message.

Unlike the House Republican bill, the Senate Republican measure could include a tax deduction for household medical expenses. It could boost the child tax credit closer to $2,000 and preserve the adoption tax credit, both areas where the GOP could afford to look more accommodating to the middle class and working families.

In another potential break with the House, Senate Republicans could cap mortgage interest deductions at $1 million rather than risk wrath from the National Association of Home Builders. The House has a $500,000 threshold.

"Our message on the Senate side has been one of caution to them because we are worried that if their bill is much the same as the House, they are inviting a housing recession," said Jerry Howard, CEO of the builders’ group.

Republicans tried to play it cool on Wednesday. The party didn't need an election loss to know they need to show results, said Senate Majority Whip John Cornyn of Texas.

"We feel significant pressure to do that and we will," said Cornyn, who called Tuesday’s losses typical midterm setbacks by a party in power.

Still, the Democratic momentum puts new pressure on the Senate. With House Republicans prepared to wrap up committee work on their tax bill sometime Thursday, Senate GOP lawmakers are putting the finishing touches on their tax legislation with a heightened awareness of the new political reality.

They don’t want to introduce a policy blueprint that has no chance of passage, after the chamber’s spectacular failure earlier this year to move legislation to repeal and replace Obamacare over the finish line. Republicans will need 51 votes to cut off debate, and the party controls 52 of the Senate’s 100 seats.

If the election results spelled trouble for the Trump brand in swing states, it matters little in the Senate, Cornyn said, noting that Democrats in 2018 have to defend nearly three times as many seats, including 10 in states where Trump won, five by double digits.

“He’s still enormously popular in some of those places and that’s how the Senate outcome is going to be determined,” Cornyn said.

To a large extent, Senate Republicans have an advantage as they ready their proposal, having watched the House Republicans defend their plan over the past week with mixed results.

“It’s certainly informative to have someone who is doing the same thing that you are, do it first and learn lessons,” said Sen. Tim Scott, R-S.C., a member of the Senate Finance Committee. He has a seat at the negotiating table to iron out the finer points of his party’s tax measure.

Rep. Trent Franks, R-Ariz., said he predicted Senate Republicans would learn from the House GOP's messaging pratfalls. For instance, he expected their version to preserve the adoption tax credit. Excluding it disturbed the party's base of social value voters.

“I bet you they’ll not make the same error in this case,” Franks said Wednesday. “A smart man learns from his experiences. A wise man learns from other people’s experiences.”

There are still areas, however, where Senate Republicans could create their own political trouble.

There is talk they could do away with state and local deductions entirely: All of the senators from heavily affected states like New York, New Jersey and California are Democrats.

And the Senate is unlikely to entirely scrap the estate tax, as the House bill does, because of concerns raised by Sen. Susan Collins, R-Maine, who has proved a critical swing vote.

Collins wouldn’t confirm the details, but noted she’s questioned the need for repealing the tax, which currently applies to inheritances of more than $5.49 million. House Republicans have sought to end the tax for years, and doing so was popular when it was included in the House bill.

Ultimately, the political map is much more difficult in the Senate, where Republicans hold a slim majority and can ill afford more than two defections. The White House has sought to pressure Senate Democrats in states where Trump won to back the tax overhaul.

The Democratic victories could make those pleas harder, noted Sen. Ron Wyden, D-Ore., the top Democrat on the Senate’s Finance Committee. Wyden, who met at the Capitol with White House officials on Tuesday, said he told them that the bill could pass with “70 or 80 votes" if the package wasn’t skewed toward corporate tax cuts.

The election results, he argued, show a middle class tax cut is "what voters demanded.”

Emily Cadei of McClatchy’s Washington Bureau contributed.

Lesley Clark: 202-383-6054, @lesleyclark

Emma Dumain: 202-383-6126, @Emma_Dumain