Republicans inch closer to passing tax bill that would 'add $1 trillion to deficit'

Wildcard senator John McCain has said he will support the legislation

Senator John McCain, seen here on Capitol Hill on November 14, 2017, has regularly criticized Donald Trump (REUTERS/Yuri Gripas)

With Senator John McCain announcing his support for the Republican tax bill, the Senate is edging closer to passing a measure that would benefit the wealthiest Americans and is estimated to add more than $1 trillion to the federal deficit over the next decade.

“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,” Mr McCain said in a statement.

Mr McCain’s endorsement may help Senate Republican leaders breathe easier during the final vote, which is expected to take place by the end of the week. In July, their attempt to repeal the Affordable Care Act, otherwise known as Obamacare, failed on the Senate floor after the Arizona Republican dramatically announced his opposition.

Mr McCain’s demonstrated willingness to buck leadership made him a wildcard in his party’s effort to cut taxes. He also voted against big Republican tax cut packages in 2001 and 2003.

But Mr McCain has said he was satisfied that the Senate’s tax legislation went through “regular order”, with sufficient public hearings and opportunities for amendments, unlike the healthcare bill.

Despite Mr McCain’s declaration that he would be a ‘yea’ vote, it is still not completely certain whether the bill will pass.

The Joint Committee on Taxation, which serves as the scorekeeper for growth and revenue estimates in tax bills, has estimated that the measure would add $1 trillion to the federal deficit over the next 10 years – even with the projected economic growth that President Donald Trump has touted. This complicates the Republican assertion that the tax cuts would essentially pay for themselves.

“It is the total opposite of what the Senate sponsors and the Trump administration have been claiming for months,” said Democratic Senator Ron Wyden, the ranking member of the Senate’s finance committee.

“What it proves is that this bill offers very little other than a holiday bonanza to multinational corporations and special interests.”

A spokeswoman for Republican Senator Orrin Hatch has criticised the joint committee’s analysis, saying it understates the actual economic growth and is not based on the current version of the bill.

“An analysis of tax provisions that do not reflect the final outcome of the evolving Senate tax bill – which will be amended on the floor this week – is incomplete,” said Julia Lawless, a spokeswoman for the Senate Finance Committee. “The nonpartisan Congressional Budget Office (CBO) has said it was ‘not practicable’ to issue a macro view of the Senate bill at this time. And given that leading economists have projected the Senate tax bill will deliver significantly higher amounts of economic growth and federal revenue than the Joint Committee on Taxation (JCT) reports, the findings of JCT are curious and deserve further scrutiny.”

But the projected addition to the deficit could still be a sticking point for deficit hawks such as Senators Jeff Flake and Bob Corker – both of whom have sour relationships with Mr Trump and don’t have much to lose by voting against the legislation. Mr Corker and Mr Flake have said they won’t run for reelection in 2018.

On Thursday, both members withheld their votes for an hour on a measure that would have sent the bill back to the Senate finance committee for further amendments – a move that would have stopped the legislation in its tracks, possibly even killing it. The senators ultimately voted against doing this.

Some Republicans wanted to include a trigger mechanism that would require taxes to be increased automatically if revenue growth doesn’t meet projections. But the Senate parliamentarian has struck down that idea as unworkable.

Analysts say the current proposal would be a windfall for the rich. Meanwhile, it is expected to have mixed effects on medium and low-income families.

It would also cut the corporate tax rate from 35 per cent to 20 per cent, while also repealing Obamacare’s requirement that most people have health insurance – a proposal that would lead to 13 million people losing their health insurance over the next decade, according to the nonpartisan Congressional Budget Office.