From left, Sen. Mitch McConnell, Sen. Orrin Hatch, Steven Mnuchin and Gary Cohn speak with reporters Thursday as work gets underway on the Senate's version of the GOP tax reform bill. | J. Scott Applewhite/AP Photo Senate GOP’s tax bill points to nasty fight ahead There are dramatic differences between the House and Senate versions of the tax overhaul, imperiling Trump's desire to sign legislation by year end.

Yawning divisions have emerged between the House, Senate and White House over tax reform, raising doubts about whether Republicans will be able to achieve their most important political and policy priority before the end of the year.

The Senate and House are split on some key issues, including the top tax rate and the timing of the corporate tax cut, and also at odds with President Donald Trump in many areas. Hard bargaining, battles between GOP factions and an onslaught of lobbying are the gauntlets Republicans will have to run to get legislation to Trump's desk by the end of the year — and into their mailers and ads for the 2018 elections.


If one thing unifies Republicans and makes the job easier than it might appear, it's the fear that they will have nothing to take into those contests after the failure of another marquee effort, repealing and replacing Obamacare. House Speaker Paul Ryan and other GOP leaders used the drubbing the party took in Tuesday's election in Virginia as a warning to the rank and file: Pass tax reform or face the wrath of Republican voters.

"We are going to conference," Ryan told reporters Thursday, after the Senate unveiled its long-awaited plan and House tax writers advanced theirs to the House floor. "Yes, the Senate bill is going to be different than the House bill because that's the legislative process."

The House Ways and Means Committee approved its bill on a party-line 24-16 vote, and House Majority Leader Kevin McCarthy said the full House would vote on it next week. The Senate Finance Committee will start working on its bill next week, maybe as early as Monday.

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One of the first differences to emerge was the Senate's plan to delay slashing the corporate tax rate to 20 percent from 35 percent until 2019. The House wants to cut the tax immediately, and has the White House on its side.

Cutting the corporate rate is the centerpiece of the GOP plan to lower tax rates and spur faster economic growth. But the Senate is trying to limit the revenue impact to allow a bill to pass with just 51 votes and avoid a possible Democratic filibuster.

In another break with Trump, neither the Senate bill or the House bill includes a repeal of the Obamacare individual mandate requiring Americans to have health insurance. But Senate Republicans are still considering a repeal to help cover the cost of making some tax cuts permanent.

GOP leaders are talking with rank-and-file members to assess whether they have the necessary 50 votes to scrap the least popular part of Obamacare.

"I'd sure like to do that," said Sen. Roger Wicker (R-Miss.) "I think we're counting votes. It sure gives us a lot more flexibility."

Trump has pushed for repealing the mandate, along with conservative senators and House members. But many lawmakers said reopening the health care debate would just make passing the tax bill harder.

The Senate plan would set a top individual tax rate of 38.5 percent, compared to the House's 39.6 percent for annual income above $1 million, and keep deductions for people with high medical bills and for student loan interest that the House wants to discard.

It would completely eliminate a federal deduction for state and local taxes, while the House had to mollify a group of GOP lawmakers from high-tax blue states by keeping the deduction for property taxes, up to $10,000.

The Senate kept the maximum mortgage deduction at the interest on loans up to $1 million. The House would cut it to $500,000.

The House targeted the estate tax — a favorite foil of conservative Republicans — for elimination in 2025, after doubling the current exemptions to about $11 million for individuals and $22 million for married couples. The Senate is proposing only to double the exemptions.

The House proposed expanding the child tax credit to $1,600 per child from $1,000. The Senate set the increase at $1,650.

But that is still too low for some senators who want a $2,000-per-child credit because they worry some middle-income people could otherwise see their taxes go up under the plan — and they have an ally in Ivanka Trump. "While we are glad to see an increase to the child tax credit, like the House bill, it is simply not enough for working families," Marco Rubio (R-Fla.) and Mike Lee (R-Utah), the main champions of the issue in the Senate, said in a joint statement.

On another hot-button issue, the treatment of "pass-through" businesses that pay individual tax rates, the Senate would set a top rate of 30 percent, while owners of those businesses have been clamoring for parity with corporations. The House is offering a super-low 9 percent rate on the first $75,000 those businesses earn, which attracted praise from the powerful National Federation of Independent Business, which had panned the House bill last week.

Both bills would shift the U.S. to a "territorial" tax system that would largely shield offshore corporate income from U.S. taxation. But they parted ways on a mechanism to discourage more companies from moving abroad to take advantage of the change.

As the first details were trickling out about the Senate plan, Ways and Means Chairman Kevin Brady (R-Texas) unveiled a new round of changes to the House GOP's plan.

Their tax plan had ballooned beyond their budget, allowing them to cut taxes by no more than $1.5 trillion, after Republicans earlier this week gutted a plan to crack down on international tax avoidance hated by the Koch brothers and a number of multinational corporations.

The revisions include hundreds of billions of dollars in new revenue aimed at filling that budget hole. Republicans did it in part by taking back much of the money — $87 billion — they had lost when they watered down those overseas tax avoidance provisions.

Another $70 billion would come from charging companies more in a one-time tax on their overseas earnings. Under the new plan, they'd pay 14 percent on their liquid assets and 7 percent on illiquid ones like factories overseas. That's up from 12 percent and 5 percent, respectively, under the previous proposal.

House lawmakers want to raise another $20 billion by requiring people claiming the popular child tax credit to provide a Social Security number for their child, a provision long sought by Republicans aimed at preventing undocumented immigrants from taking the break.

Delaying their plans to repeal the estate tax by another year saved them $21.5 billion. They'd raise another $109 billion from companies tapping a long-standing break for research and development expenses.

Other House provisions would expand a tax on private university endowments and impose a surtax on life insurance companies.

The plan also would allow organizations such as charities and churches to engage in political speech without risking their tax-exempt status, and it restored a tax break for adopting children that had been on the chopping block.

Senate Finance Committee aides said the panel was still working to make its bill compliant with the chamber's budget rules, which don't allow the tax bill to add to deficits outside the 10-year budget window.

Given the GOP's slim majority in the Senate and the danger of a repeat of their Obamacare fiasco, some House Republicans were resigned to more or less having to defer to the Senate.

"I look at it more as a priority of process and procedure over substance," said Rep. Dennis Ross (R-Fla.). "While there are some very good things, don't get me wrong, substantively in our bill, I think the canvas will probably be painted in its final stage in the Senate once we give them the vehicle."

Ben White, Josh Dawsey, Colin Wilhelm, Seung Min Kim, Elana Schor and Jennifer Haberkorn contributed to this report.