[HOT] – Why a Firm Believer in Tax Cuts Could Derail the Senate Tax Cut Plan

] WASHINGTON – On the eve of the House vote to adopt a $ 1.5 trillion tax cut, Wisconsin President Paul D. Ryan hastily telephoned his senatorial senator , Ron Johnson, in the unlikely hope of conflict in his own garden

Mr. Johnson had become the first Republican of the Senate to declare publicly that he could not vote for the Senate version of the tax bill. During the phone call on Wednesday afternoon, Mr. Ryan, who had been campaigning for Mr. Johnson in 2016, asked a key question, according to the senator: "What are you going to need?"

What Mr. Johnson needs, he said in a Wisconsin interview Friday, is that the bill deals more favorably with Small businesses and other so-called pass-through entities – companies whose profits are distributed to their owners and taxed at rates for individuals. Such entities, including Mr. Johnson's family-owned plastics business, account for more than half of the country's business income and the senator said that the tax bill would give an unfair advantage to large corporations.

"I have just in my heart a real affinity for these transmissions operated by their owners" he said. "We have to make American companies competitive – they are not currently, but by making companies competitive, we can not leave the relays behind."

The sudden crack between longtime allies has laid bare the challenge Republicans are facing the fact that the bill leaves Ryan's care and sails in the rough waters of the Senate , where different priorities within the party could sink the bill if it is not adequately addressed

The Republican leaders of the Senate, who wish a major legislative victory before the end of the year, hope that their bill, which differs significantly from the measure of the House, will be voted after Thanksgiving. But it is unclear whether he has enough support to move into the narrowly divided chamber

Offer concessions to Senators skeptical one by one might prove impossible task for Republican leaders, who face restrictions under the Senate rules on the total size of the tax reduction package. Instead, these leaders hope to be able to come up with a version of Mr. Ryan's strategy: anything but dare to derail the party's top priority

The Republicans, who control Congress and the White House, are desperate for their first significant legislative achievement of Trump's presidency. Johnson's public hesitation sparked calls from President Trump and a visit by Treasury Secretary Steven Mnuchin and Gary D. Cohn, President of the National Economic Council, who all polled Johnson about his concerns.

Mr. Johnson is a strong supporter of the power of tax cuts to stimulate economic growth. He grew up on a Minnesota farm, worked as an accountant after university, and spent more than 30 years in family plastics before taking up his seat in the Senate in 2010.

Since his reelection in 2016, he has not hesitated to express his dissatisfaction with regard to the Republican leaders. He was an early and energetic critic of the party's legislation to replace the Affordable Care Act, although he eventually voted in favor of the bill.

Its Concerns about the Senate bill do not stem from its overall goal of reducing taxes, but from the way in which the draft of law deals with small businesses and large corporations. Johnson says the legislation is in favor of big business, and he is keen to find a way to level the playing field.

. Ryan, who was the party's vice-presidential candidate in 2012, helped Mr. Johnson access the Senate. Mr. Ryan shelled Wisconsin on behalf of Mr. Johnson when his reinstatement offer had taken off last year and the two had forged an obligation in Washington


"Do you know what we control, with the election of Ron Johnson?" Mr. Ryan asked the crowd at a rally the day before the election. "We in Wisconsin control who controls the US Senate If you want something done – pass it to the House, get it from the Senate and put it on the chair's desk." Republican for it to be adopted – Ron Johnson must be reelected. "

But the dynamics of the two chambers differ markedly. Mr. Ryan and other Republican leaders used a process of command and control and a rocket schedule to minimize Republican dissent.The strategy worked: The project passed through the House Thursday along the party lines, two weeks after its introduction.

President Paul D. Ryan called M Johnson, a Wisconsinite comrade, last week to see how he could be persuaded to support the tax bill. Credit Al Drago for the New York Times

In the Senate, where margins Party members are much weaker and individual members are more powerful, party leaders will need to win what could be half a dozen or hesitant Republicans, starting with Mr. Johnson. The others include Senators Bob Corker, Jeff Flake, Lisa Murkowski, Susan Collins and John McCain

The Senate Bill authorized Thursday the Senate Finance Committee. Before he can support it, he added, Johnson wants to see changes in the treatment of intermediate entities in order to put them on an equal footing with the companies. While the rates would fall for Mr. Johnson's family affairs under the Senate bill, they would not fall as much as those of large corporations.

More than 90% of American companies are relays. The Senate bill would give homeowners a deduction of 17.4 percent on their income taxes, while reducing the corporate rate to 20 percent from 35 percent. The special deduction means that the owner of a high profit transmission would pay a higher effective rate of about 32%, well above what a traditional company would pay.

The transmission processing has received the approval of the National Federation of Independent Business, the powerful lobby group for small businesses. "We love the Senate bill – it's a very good deal for the vast majority of relay companies," said Jack Mozloom, a spokesman for the group. "According to our analysis, we think this will provide them with a substantial tax break."

Mr. Johnson started the plastic rolling company of the family in 1979 with his brother-in-law. During his career, he said, he has seen many family businesses – his clients – get sucked up by larger companies, or retreat after being unable to compete with them. He said the tax code was unfairly favoring these companies and that the Senate tax bill would broaden these benefits by lowering corporate taxes more substantially than for charter businesses.

Mr. Johnson's preferred approach to this imbalance would be to force all corporations to become relay companies, a measure that, according to him, would equalize the tax treatment and encourage more business investment. He says that this approach would not benefit him personally because it would not reduce the taxes on transmissions; Mr. Johnson earned between $ 215,000 and just over $ 2 million in transfer income in 2016, through several limited liability companies.

But Mr. Johnson concedes that his Republican colleagues do not seem likely to add such a provision to their tax bill. "Unfortunately," he says, "it's quite late in the game."

And the question becomes: what changes would it accept?

Republican leaders will likely have to ask this question to several senators in the days to come. Mr. Flake, from Arizona, and Mr. Corker, from Tennessee, have expressed concerns that the bill would add to the budget deficit, particularly if Republicans do not allow all individual tax benefits – and pass-through – to expire at the end of 2025, as currently provided in the bill.

Ms. Murkowski, of Alaska on Friday stated that if the bill continued to include a repeal of the Individual Affordable Care Act's mandate to buy health insurance, she would prefer that Congress first pass a different bill to help stabilize the insurance markets. "However," she said in a statement, "it should not be assumed that this is a prerequisite for my support for the tax bill."

. Johnson suggested in the interview that if the Senate did not require all companies to operate as a relay, it should at least reduce their taxes to equalize their treatment with large corporations. Such cuts, he acknowledged, would be costly in terms of lost tax revenue, and Republicans must stay within the $ 1.5 trillion limit for additional deficits in order to pass the tax bill on a vote party line [19459005

The senator said that he would have preferred that Republicans, in an earlier budget bill, set this limit higher, at $ 2 trillion or $ 3 trillion.

For the time being, Mr. Johnson stated that he was collecting information and trying to work with officials of the Administration to identify the group of relay companies that needed the most help.

"I am optimistic" that solutions will be found, said Mr. Johnson, "because we all understand how much it is. is important, I do not want to block this, I do not want to block that. "

Senate leaders rely on this attitude, then that they are trying to replicate Mr. Ryan's success in House. They believe that on a fundamental conservative issue, at a time when the party is still looking for a legislative signing victory under Mr. Trump, no senator will want to be the one who blocks the bill.

They also note that although Mr. Johnson raised similar concerns about the failure of the Care Bill party health earlier this year he finally voted for.

Correction :

Due to an editing error, an earlier version of this article made a false statement about the state where Senator Ron Johnson grew up. It was Minnesota, not Wisconsin


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