Senate Finance Chairman Orrin Hatch (R-Utah) fired a warning shot Thursday, saying his panel will not be a "rubber stamp" for whatever is proposed. | Aaron P. Bernstein/Getty Images Big Six still divided over basic elements of tax reform

The "Big Six" are deeply divided over how to rewrite the tax code, including how to finance long-promised cuts in individual and corporate rates.

Though House Republicans are promising to release a plan the week of Sept. 25, the top congressional and administration negotiators remain at loggerheads over a number of items, including plans to reduce a deduction for state and local taxes, as well as one for corporate interest expenses.


“Right now, the Senate and the House are pretty far apart,” said one Republican aide, whose account was confirmed by another source. “There’s serious frustration.”

Senate Finance Chairman Orrin Hatch (R-Utah), himself a member of the Big Six, fired a warning shot Thursday, saying his panel will not be a "rubber stamp" for whatever is proposed.

One major hang-up is whether to adopt a plan that would allow companies to immediately deduct the cost of their investments, sources say.

Sign up here for POLITICO Huddle A daily play-by-play of congressional news in your inbox. Email Sign Up By signing up you agree to receive email newsletters or alerts from POLITICO. You can unsubscribe at any time. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Known as "expensing," it’s a top priority for House Republican leaders because many economists say it’s one of the best things lawmakers can do for economic growth. What’s more, House Speaker Paul Ryan has already compromised on one of his other top priorities, a now-discarded proposal to create a “border adjustable” business tax that would have hit import-reliant companies.

But the deduction is hugely expensive, and Senate Republicans believe it won’t fly in their chamber.

The White House, not to mention many in the business community, is much more interested in cutting the corporate tax rate as deeply as possible, though that is also pricey at roughly $100 billion for each percentage point reduction.

The Big Six are also divided over how sharply to cut a long-standing deduction for corporate interest expenses. House Republicans have proposed ending it entirely, which would raise some $1 trillion, covering a big chunk of the cost of any plan. But the break is important to many companies, and other negotiators want to only reduce it.

The group is also at odds over eliminating a long-standing deduction that individuals can take for the state and local taxes they pay. Ryan has repeatedly called for eliminating it entirely, calling it a subsidy for state governments, but some are concerned over what that would mean for upper-middle-class people.

Hatch, meanwhile, is pushing a plan that would shift some of corporations' tax burden onto their shareholders. He believes that the so-called corporate integration plan would be a more cost-effective way of reducing the tax burden companies actually pay, though the idea has not gotten much traction with House Republicans.

"People are out of practice to do big tax bills," the GOP aide said. "Tempers are high."

In a sign of the tensions, Hatch signaled Thursday that he would treat the long-promised tax framework only as a guidepost — not necessarily a binding commitment.

His tax-writing committee won't be "anyone's rubber stamp," Hatch said.

"The group — some have deemed us the Big Six — will not dictate the direction we take in this committee," he said.

“Any forthcoming documents may be viewed as guidance or potential signposts for drafting legislation,” he said. “But, at the end of the day, my goal is to produce a bill that can get through this committee.”

Hatch's warning will make it harder to move legislation in the House — where tax bills must begin, under the Constitution — because lawmakers there will think twice about voting for controversial changes that may not survive the Senate.

The Big Six negotiators have been working for months behind closed doors trying to get the House, Senate and White House on the same page regarding the overall contours of any tax rewrite. They want to then hand over their plan to Congress' tax-writing committees to fill in the details.

The process was set up to avoid a replay of the Obamacare repeal debacle, when House Republicans muscled a plan through their chamber only to watch it collapse in the Senate.

"We don't want to repeat that again," Ryan said Wednesday.

The group comprises Ryan, Hatch, Senate Majority Leader Mitch McConnell, House Ways and Means Chairman Kevin Brady (R-Texas), Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn.

Republicans are racing to push tax legislation through Congress by the end of the year, before next year's midterm elections begin to loom. It's their top priority on Capitol HIll, and many lawmakers fear voters will punish them if they fail on taxes after their Obamacare plans fell apart.

Asked at the POLITICO Pro Policy Summit on Thursday of disagreement among the negotiators, Mnuchin said: "That's just not the case."

But Trump has begun sounding out Democrats on a possible bipartisan tax deal. Rep. Richard Neal (D-Mass.), the top Democrat on the tax-writing Ways and Means Committee, said his side may be able to work with the administration.

"I think there's room here for some agreements," he said, pointing to Trump's recent suggestions that he may not cut taxes on the wealthy.

Trump's comments contradict a string of independent assessments of his previous tax plans that found they would primarily benefit the top 1 percent of earners.

"He seems to be more interested in Democratic positions on taxes," Neal said. "It seems to me pretty clear that he's not headed towards 2001 and 2003"-style tax cuts.

Brady agreed Trump may end up turning to Democrats for a deal.

"If Republicans aren't willing to unite and deliver on tax reform, he'll find someone else" to work with, Brady said at the Policy Summit.

Aaron Lorenzo and Colin Wilhelm contributed to this report.

