Introduction

On a balmy April day in 2017, a sandy-haired, square-jawed New York tax lawyer named Dana Trier was heading to Washington, D.C., for a graduate-level economics class at Johns Hopkins. Trier, a tax policy official in the Ronald Reagan and George H.W. Bush administrations, had made a name for himself as a tax expert at the Wall Street firm Davis Polk. By this time, he was 68, semi-retired, working a bit at the law firm, teaching law at the University of Miami, and taking graduate courses. Trier was affable, but also a straight shooter.



As he settled into his seat on the Acela, Trier’s phone buzzed with an email alert. It was a message from another tax expert, Daniel Berman. Four months earlier, Trier had run into Berman, a longtime friend and a former Treasury tax lawyer, at an American Bar Association tax section meeting in Orlando. They had briefly discussed new tax legislation being considered by the just-seated Congress, and Trier half-joked that he might be interested in being part of that effort.



Dana Trier, here at a 2018 Brookings Institution event, was hired by the Trump administration to help write the tax bill. “I thought I could make it work,” he said of the tax bill. “And in fact, we didn’t reach my standard.” (Screenshot from Brookings Institution video)

But the email came as a surprise. Referring to their Orlando conversation, Berman asked, “Would you like to be DAS [Deputy Assistant Secretary for Tax Policy] again?” Trier replied: “Yes, but I find it very unlikely that I would be asked.” “It might be more likely than you think,” Berman shot back.

It turned out Berman was wired in. He was friends with Dave Kautter, who would be named assistant secretary for tax policy in the new Trump administration, and who was putting together a Treasury team to work on tax reform. Within days, Trier met with Berman, Kautter, and others at Treasury. They told Trier that he was their man.

Trier was enthused. He was a Republican, though definitely a moderate. He thought the tax code had gotten out of whack, and reform was overdue. Here was a chance to play a crucial role in a much-needed overhaul, and perhaps even to author some real innovation.

The feeling didn’t last long. Six days later, on April 26, President Donald Trump released his one-page plan for Tax Reform, and Trier was aghast. The plan was clumsy, unsophisticated. It was short on specifics — just bullet-points — and some of them in Trier’s view were crazy. One bullet said: “15% business tax rate.” If this meant corporate taxes, which were then at 35 percent, it would be impossible to pay for, Trier thought. It also seemed to include one-owner businesses and partnerships, which would make it even harder. “I mean I thought to myself, ‘My God, I’m joining this administration? This is lunacy.’”

“I never really did recover from that,” Trier said.

He was not alone.

“I mean I thought to myself, ‘My God, I’m joining this administration? This is lunacy.’” Dana Trier

‘Big, big cut’

What would become known as the 2017 Tax Cuts and Jobs Act, or more commonly, the Trump tax cuts, was officially launched with six sentences in Trump’s first address to Congress on Feb. 28. There would be a “big, big cut” for companies, and “massive tax relief for the middle class,” he said. “Have to do it.” For Republicans, the idea held promise.

But by the time the measure was signed into law 10 months later, it had ridden a roller-coaster ride of flip-flops, exaggeration, hypocrisy, falsehoods and contortions. Rosy estimates of economic growth were summoned from right-wing pro-growth think tanks. Budgeting gimmicks made deficits disappear. Deals were cut. Historic Republican concerns about the long-term debt were abandoned. The result: flawed and ill-considered legislation that disappointed some tax experts like Trier, and utterly flummoxed others.

In his Joint Address to Congress on Feb. 28, 2017, President Donald Trump officially launched his tax cuts effort, saying there would be a “big, big cut” for companies and “massive tax relief for the middle class.” (Official White House Photo by Shealah Craighead)

The Center for Public Integrity spent six months studying the process that created the tax act. Among its findings:

Corporations, which drove the train, got even more of a tax cut than they wanted. Yet they refused to promise that their huge tax break would hike worker wages. Medium-sized and big businesses got something they had only dreamed of — though in provisions so badly written one tax expert called them a “travesty.”

Rich Republicans lobbied Trump at a Manhattan fundraiser and got 2.6 percentage points lopped off their highest tax bracket.

Deficit hawks, that is, those opposed to creating any new federal debt, hemmed and hawed and finally folded, as one commentator put it, “like a cheap suit.”

An idea that would have raised $1 trillion and paid for much of the tax cuts was soundly defeated by a powerful business lobby.

Republicans used $1.5 trillion in what some call accounting gimmicks to either hide the true cost of the bill or help justify their votes.

The bill was drafted in secret, partly to keep it from Congress’s own members who, it was feared, would leak it to lobbyists.

A key nonpartisan agency that tried to give an honest assessment of the cost of the bill was brazenly cut out of the picture.

Beyond that, two main themes emerged.

One is that the bill, with its 21 percent corporate tax rate, was first and foremost a gift to multinationals. They had wanted cuts in the corporate tax rate for foreign and domestic profits for decades. Everything else flowed from that: the tax cuts for smaller businesses known as “pass-throughs,” which had been their holy grail, and the cuts for individuals, which were needed to sell the bill to voters.

The second: All the posturing about “tax reform” and “revenue neutral” was meaningless. In fact, the bill had to create a $1.5 trillion 10-year deficit to pay for its generous tax cuts, which some believed would create economic growth. Without the deficit, the corporate rate of 21 percent could never have been achieved, and, more important, the bill could not have passed at all.

No tax bill, no money

The moment that exemplified the pressure Republicans faced came on June 25, 2017. Donors were wrapping up a weekend retreat in Colorado Springs run by the billionaire Koch brothers. It was held at the grand Broadmoor hotel and resort, where guests could play the championship golf course, ride horses and fly-fish, or watch swans swimming in Cheyenne Lake, the majestic Rockies in the background. Four hundred givers attended, each pledging at least $100,000 to the Kochs’ political network, which planned to spend at least $300 million in the 2017-2018 election cycle. Eighteen politicians showed up too.



The Broadmoor Resort in Colorado Springs hosted a Koch brothers-sponsored fundraiser for 400 donors in June 2017. One wealthy attendee, Doug Deason, declared that his “Dallas piggy bank” was closed until Republicans repealed Obamacare and passed tax reform. (Tim Chambers/Creative Commons)



The atmosphere was tense at times, because it was the midpoint of 2017. The GOP-led Congress had pledged two major accomplishments — a repeal of Obamacare and enactment of tax reform. They really had just six more months. The next year, 2018, would kick off the mid-term election campaign, and these measures, if passed then, would only energize Democrats. And if the Republicans lost one or both houses in 2018, it was game over.

As the retreat wound down, some donors spoke to the press. One wealthy attendee, Texan Doug Deason, who oversees his family’s $1.5 billion fortune, was blunt. He declared that his “Dallas piggy bank” was closed for 2017 until Congress achieved both Obamacare repeal and tax reform.

“All we were saying was that we were not going to support legislators anymore until they did what they promised to do when they were elected,” Deason told the Center.

The same message was echoed by the Koch brothers and other donors. Politicians got the message. Republican Dave Brat, at the time a Virginia congressman, said there would be serious consequences in the midterms if his party did not deliver.

“If we don’t get health care, none of us are coming back,” he said in a brief interview with the AP. “We don’t get taxes through, we’re all going home. Pack the bags.”

Pressure came from other quarters, too. On July 20, the U.S. Chamber of Commerce, typically a major pro-GOP spender, warned in an open letter: “We are a quarter of the way through this Congress, but we are not yet where we need to be on key issues like health care, tax reform, and rebuilding our crumbling infrastructure. Promises were made; promises must be kept.”

“If we don’t get health care, none of us are coming back. We don’t get taxes through, we’re all going home. Pack the bags.” former virginia congressman Dave Brat

But the first promise wasn’t to be. On July 28, an ailing Sen. John McCain, R-Ariz., cast the deciding vote that killed Obamacare repeal. Now tax reform was all Republicans had left.

The stuff on the shelves

They had plenty of proposals to work with. Despite later criticism that the tax bill was done so quickly — 51 days from introduction to passage — GOP leaders argued that the measure’s origins dated back to 2011.

At that time, Max Baucus, a Democratic senator from Montana and chairman of the Senate Finance Committee, and Michigan Republican Dave Camp, then chairman of the House Ways and Means Committee, had joined forces to craft tax reform proposals. Camp released a draft bill, the 979-page Tax Reform Act of 2014, on the last day Congress was in session before he left office. It was never passed, but more than 1,000 pages of drafts provided an “inventory” for a future bill.

Some of what was in the Baucus and Camp proposals would be adopted by the Republicans in 2017. But not all of it, Baucus said in an interview. Baucus said the Republican bill drafters in 2017 cherry-picked from his and Camp’s legislation, grabbing, for instance, their ideas to reform the international tax code and cut the corporate tax rate.

But they ignored the main point of the legislation, that Baucus’ and Camp’s bills were revenue neutral, meaning every dollar in tax cuts was matched by a dollar of additional tax revenue. “It’s true that Dave and I thought we needed reform, but on a deficit-neutral basis,” Baucus said. Camp declined to be interviewed.

Beyond the Baucus and Camp proposals, the main blueprint for the tax bill was supplied in 2016 by Speaker of the House Paul Ryan, a Wisconsin Republican. A self-proclaimed deficit hawk, he had proposed privatizing Social Security and, later, Medicare. Ryan served as Ways and Means chairman until October 2015. He was succeeded by Kevin Brady of Texas. Brady, also a fiscal conservative, had in the past proposed spending caps on the budget and an end to earmarks. Rep. Peter Roskam, R-Ill., who chaired the Ways and Means Subcommittee on Tax Policy, which oversaw the writing of the House’s tax bill, called him “uniquely gifted” for leading tax reform because of the equanimity of his disposition.

On June 24, 2016, Ryan and Brady unveiled their “A Better Way” agenda, which outlined major changes in various policies, including tax reform. Designed as a framework for GOP campaigning in 2016, it called for a revenue neutral tax bill.

In 2016, months before the presidential election, then House Speaker Paul Ryan of Wisconsin unveiled his A Better Way agenda, which included reforming the tax code to include a $1 trillion border adjustment tax and to not increase the national debt. Neither was included in the tax law that President Donald Trump signed 18 months later. (AP Photo/J. Scott Applewhite)

And the Better Way was bold. For years, Republicans and even Democrats had been saying the 35 percent U.S. corporate rate was too high, out of line with the international average of about 23 percent. Ryan-Brady proposed a U.S. corporate rate of 20 percent, claiming it would generate jobs and wage growth.

Ryan-Brady also addressed international taxes. Under the U.S. system at the time, if an American company earned profits overseas they were taxed the same as U.S.-made profits when the money was brought home (with a credit for foreign taxes paid). So, more and more U.S. internationals were moving operations overseas, or keeping their profits there, where they paid lower rates.

Other countries taxed only profits made at home, a so-called “territorial” tax system, as opposed to the “worldwide” system used by the United States. The Ryan-Brady plan moved toward a territorial system. And to get corporations to return their foreign-earned profits, it suggested a modest one-time tax on money repatriated from overseas.

Most important, the Ryan-Brady plan proposed a Border Adjustment Tax (BAT), which would tax imports coming into the United States but not U.S. exports. So, taxation would not depend on where a company was based, only where its products were consumed, and companies would see no need to move overseas. The BAT was expected to generate a trillion dollars’ worth of tax revenue, cash that could pay for a trillion dollars’ worth of tax cuts. This was the goose that laid the golden eggs — theoretically.

Not everyone thought the Better Way was truly a better way. The Urban-Brookings Tax Policy Center in September 2016 looked at its proposals for individual tax cuts and found that by 2025, 99.6 percent of its net tax cuts would go to the top 1 percent of earners. The nonpartisan Tax Policy Center said the plan would cause the federal debt to rise $3 trillion in its first 10 years and $6.6 trillion by the end of the second decade.

Two ideas buried in the Better Way plan, however, would have a huge bearing on what the tax bill would be portrayed as costing. One was called the “current policy baseline” and the other was “dynamic scoring.” These bureaucratic-sounding terms would be used much later to mask the bill’s deficits — and to defend votes by lawmakers. But they were hardly noticed at the time.

The imperative of cutting the corporate rate

Until Nov. 8, 2016, Republicans thought the whole point of A Better Way was simply to frame discussions with Democrats on the upcoming tax reform debate. That was because many Republicans, including Trump himself, thought Hillary Clinton would be the next president.

Trump’s election stunned millions. But not John Feehery, 55, a stocky, blunt-spoken partner at EFB Advocacy, a boutique PR and lobbying firm on Capitol Hill. Feehery was a respected voice who had handled the not-always-easy communications strategies for controversial GOP leaders Dennis Hastert and Tom DeLay. In March 2016, in his weekly column in The Hill, Feehery published a six-point letter arguing why Republicans should support Trump if he won his party’s nomination.

Prior to that, in 2015, Feehery’s firm was hired by the RATE — Reforming America’s Taxes Equitably — Coalition, which had been pushing for corporate tax cuts. EFB seemed well-suited for the job. “We take complicated issues, and we turn them into compelling narratives,” says the firm’s website. RATE had a membership of 35 major corporations, including AT&T Inc., Nike Inc., The Boeing Co., The Kraft Heinz Co., The Walt Disney Co. and Northrop Grumman Corp. In 2012 the coalition wrote Congress arguing that the corporate rate of 35 percent was the highest among industrialized nations, and in 2014 it pushed for a rate of 25 percent.

The next two years, Feehery’s firm lobbied Congress for the 25 percent rate. President Barack Obama eventually said he could support a rate of 28 percent.

But Congress didn’t act. And then Trump, who had campaigned on a 15 percent corporate rate, won, changing everything. “And once he won,” Feehery said, “we had to be very much not even talking about a number, not 25 percent, not 20 percent; it was just low as you can go.”

Among Republicans, a big corporate rate cut was not a tough sell. The RATE coalition had “framed the debate well in the preceding years,” Roskam told the Center in an interview. “And so there was orthodoxy on the Republican side and even assent on the Democratic side.”

But many — including Dana Trier — thought 15 percent was crazy. To pay for such a low rate, too many interests would have to give up their beloved tax loopholes. “First of all, people didn’t think it was realistic,” said a lobbyist working on the tax bill. “And then you had the tax [breaks] that people thought that they’d have to give up, which they didn’t want to give up, which they thought gave them a strategic advantage in the marketplace.”

An obstacle for Feehery was that a corporate rate cut was not an easy sell to the American public, especially Trump voters, who were thought to have a deep dislike for both corporations and their chief executives. Feehery’s job was to convince these voters the rate cut would produce more jobs and higher wages.

The “more jobs” effect was not universally accepted. One report, by the left-leaning Institute for Policy Studies in August 2017, looked at 92 large publicly traded U.S. corporations. ExxonMobil Corp. paid an effective tax rate of 13.6 percent from 2008 to 2015 while it cut one third of its global workforce, the study said. AT&T paid 8.1 percent in taxes while cutting 80,000 jobs over the same period. Meanwhile, stock buybacks boomed, and the average CEO pay increased 18 percent.

The “higher-wages” argument was an even tougher sell. Corporations balked at saying tax cuts would lead to higher wages because they didn’t want to be bound to a promise to increase pay, a lobbyist for the companies said. When the White House’s Council of Economic Advisers predicted that a 20 percent corporate rate would hike average annual household income by $4,000, the Communications Workers of America, a 700,000-member union, asked eight major corporations to pledge to hike worker wages by $4,000 if they got the tax cut. The companies didn’t respond. That “shows you the difficulty they have, and not only in messaging but also why people don’t like them,” said one lobbyist who asked to remain anonymous so as to be able to speak freely.

As for Feehery, he relied on Trump’s own words in social-media blitzes.

“One of the things we found is the Trump voter likes Trump, but doesn’t love Corporate America,” Feehery said. “Trump has so much credibility with the Trump voter that he can make the sell.”

“One of the things we found is the Trump voter likes Trump, but doesn’t love Corporate America. Trump has so much credibility with the Trump voter that he can make the sell.” John Feehery, partner at PR and lobbying firm EFB ADVOCACY

Trump’s one-pager and the death of the BAT

Beyond a simple corporate tax rate cut, the specifics of Trump’s broader thinking on tax reform were hard to divine. Clues could be found in his one-page “tax reform” outline, the first official, and much anticipated, statement the administration issued on the subject. The White House released it on April 26 and it included: a “15% business tax rate,” repeal of both alternative minimum taxes and estate taxes for the wealthy, and cuts in taxes for individuals. A so-called “territorial” tax system for corporations and a one-time tax on money held overseas would help pick up the tab.

Tax experts were underwhelmed. At a discussion hosted by Tax Analysts, a reporting service based in Alexandria, Virginia, just days after the one-pager was released, five panelists largely agreed that the Trump outline did little to advance the tax-reform debate and may even have set it back. The Committee for a Responsible Federal Budget posted in a blog that the Trump one-pager could cost between $3 trillion and $7 trillion over a decade.

For Trier, the tax expert, the plan carried another message: Treasury Secretary Steven Mnuchin — who clearly had had a hand in the one-pager — was “not ready to lead tax reform.”

That view was suggested by Mnuchin’s many pronouncements — starting in November 2016 — that the rich would not benefit from the tax bill. One thing tax experts know: If you cut corporate taxes you benefit the rich. It’s elementary. Because the rich own stocks, their stocks would get tax cuts. Plus, they might see greater dividends, and would likely see their stock value increase due to buybacks. Their capital — old capital — would be worth more. Mnuchin declined a request for comment.

The Trump one-page plan carried one other subtle message: the lack of any mention of the border adjustment tax known as the BAT, part of the Ryan-Brady plan to fix international taxation. The BAT was thought to generate $1 trillion in revenue, money that could help fund the corporate tax cut and try to keep the bill revenue-neutral. A 15 percent corporate tax rate would cost about $2 trillion alone.

But Trump didn’t endorse the BAT, and many others didn’t like it. On Feb. 1, 2017, 100 companies and trade associations, including Nike, Target Corp., Best Buy Co. Inc. and Wal-Mart Stores Inc., all of which rely heavily on imported goods that would be taxed by the BAT, had announced their opposition to the tax. On Feb. 19, nine days before Trump’s address before a joint session of Congress, Sen. Lindsey Graham, R-S.C., said the House border tax plan “won’t get 10 votes in the Senate.”

An anti-BAT video from the National Retail Federation

By mid-May, the BAT was in more trouble. The Koch-supported Americans for Prosperity published an anti-BAT video, “The Truth About the Made in America Tax.” National Retail Federation officials handed out bright yellow “B.A.T. TAX” hats to say the tax would be passed on to consumers. On May 23, Mnuchin contended at a Peterson Foundation Fiscal Summit the tax did not level the playing field for U.S. businesses, as its supporters had asserted. “It has very different impacts on different companies,” he said. “It has the potential to pass on significant costs to the consumer.”

That same day, The New York Times called the BAT “finally dead.” Republicans were going to have to go back to the drawing board to find new revenue to pay for tax cuts, and it looked like they would struggle to do a major rewrite of the tax code, the Times said.

But Brady and Ryan seemed to have no intention of quitting. As late as June 20, Ryan told CNBC that the BAT was not dead. He may have been whistling past the graveyard. Ryan was part of a steering group for the tax cuts known as the Big Six — which also included Mnuchin, Economic Council Director Gary Cohn, Senate Finance Committee Chairman Orrin Hatch, Senate Majority Leader Mitch McConnell, and Brady. As such, Ryan knew which way the winds were blowing.

On July 27, the Big Six released a one-page list of “musts” for both houses to write into their bills. It included lower rates for all American businesses, immediate write-offs for capital investments and bringing back profits held overseas. But what stood out was its explicit declaration: The border adjustment tax was finally and officially dead. Ways and Means member Lloyd Doggett, a Texas Democrat, crowed, “Republicans have created a trillion-dollar hole in their plan.”

The House and Senate go separate ways

The July 27 joint statement from the Big Six held another important, if Delphic, message that was discernible only to the priests of the tax process. It said, in effect, that the House and Senate would go their own ways and write their own bills concurrently — a stark deviation from past practice, in which the House writes the tax bill first, then the Senate makes additions and adjustments. In 1986, for instance, the Reagan-era tax act, after being approved by the House, was sent to the Senate, which worked on it for six months to create its version.

Trier explained: “It was a kind of, a sort of an agreement, ultimately an agreement to disagree, so to speak, and for the House to go its way in its initial passage of the legislation and the Senate to go its way. And however that got resolved, it got resolved.”

The agreement had risks. It could surely speed up the legislative process, which Republicans needed with time running out. But it could also be messy and confusing with two bills in play. It was too soon to tell, but at least both houses were using the Camp draft legislation as guidance. Perhaps they would agree on enough provisions to make this unorthodox process work.

As for Trier, he couldn’t start working on the tax bill until he got his security clearance. He finally arrived on July 10 at his office at the grand, high-columned Treasury building at 1500 Pennsylvania Avenue. He found House tax staffers hard at work. There was material in the old Camp bill that they could use, and other ideas abounded.

But he quickly learned that the House and Senate disagreed over some key issues: international tax provisions, how to reward small businesses, and how to deal with estate taxes, for instance. There were other differences too, chief among them that the Senate was not getting any help from Treasury. Trier worked on the House side with its legislation, but only on rare occasions was he consulted by the Senate.

Because the Constitution says that spending and revenue bills must originate in the House, House members felt a certain authority. They looked askance at their Senate colleagues, who they felt were not as serious.

That said, the House bill-writers made attempts to share with their Senate peers what they were working on, but they felt the senators were not especially helpful. “So, we would come into a conference in H-208, which is Brady’s ceremonial Ways and Means office, and we’re sitting down with the [Senate bill-drafters], the Republicans, and they would just [say] this [about a certain provision]: It’s not going to pass. You know, like no way,” one House bill-drafter said.

The message was clear. The House might have the first cut, but the Senate would have the final word.

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Reconciliation and other secrets

Controlling both houses of Congress, the GOP leaders had decided to do the tax bill through a process called reconciliation. Originally designed for making small adjustments in the budget, the reconciliation process had been hijacked over the years by Democrats and Republicans alike to pass big money-related bills.

Reconciliation presented one huge advantage to the party controlling Congress, in this case, the Republicans. It allowed them to pass a tax bill, which would normally require 60 votes in the Senate to defeat filibusters, with a simple majority. Because the GOP had the Senate majority, 52-48, it could cut the Democrats completely out of the tax legislating process.

But reconciliation had its challenges. First, the whole bill had to be germane to only taxing and spending. Second, both houses had to write budget bills that contained instructions for the reconciliation process, and then, if their instructions were different, they had to be joined into one final set of instructions.

The reconciliation process put the Senate in the driver’s seat, because the margin for passage in the Senate was so thin — Republicans could only lose two GOP votes — that, in the end, the House had to agree to whatever would win in the Senate.

It created a horse-trading dynamic in the Senate, according to a member on the House side. “I’m convinced, based what I’ve seen in the Senate, this is the way the Senate process worked: ‘What’s it going to take you to vote for a tax bill? Like on child care, we’re good? You get the child care thing? We’re good.’”

“I’m convinced, based what I’ve seen in the Senate, this is the way the Senate process worked: ‘What’s it going to take you to vote for a tax bill? Like on child care, we’re good? You get the child care thing? We’re good.’” House member involved in the bill

Senate sources said that characterization was unfair and that their process was thoughtful and deliberative. In the House, the bill drafters consisted of Ways and Means staffers and members of the Tax Policy Subcommittee chaired by Roskam, plus Ways and Means chief tax counsel Barbara Angus and George Callas, who was tax counsel to Paul Ryan. They were the incubators. Angus declined to be interviewed. Callas didn’t respond to requests for comment.

The Senate Republican leaders, selected by Senate Finance Chairman Orrin Hatch, R-Utah, were Pat Toomey of Pennsylvania, Rob Portman of Ohio, John Thune of South Dakota, and Tim Scott of South Carolina. They were known as the Core Four.

The Core Four met several hours a week, and the meetings lasted several hours each. But what they were doing was on close hold. Not only were the two houses not working closely with each other, but the small, select group of bill drafters were reluctant to share what they were doing with their own members.

Why not? The first answer was a fear of lobbyists. Any piece of the bill that got out — and members were notorious for leaking — would allow it to be picked to death by lobbyists. And lobbyists would tell their Democrat friends what was being drafted, further creating trouble. Second, at least in the Senate, every member would certainly have an issue with some part of the bill. And to pass the bill they needed nearly all members on board. So, as they were drafting, it was best to keep things on close-hold.

House leaders periodically tried briefing their members, but then quickly saw the details spread like wildfire across the Hill and among lobbyists. That drove a paranoia that lobbyists would block any provision not viewed as in the interest of their clients.

There was a similar fear that Treasury officials would leak to lobbyists, so to the extent that Treasury was cut out, it was viewed as a good thing. “You know this is completely different than the ’86 act,” Trier said. “They wanted to keep everything tight, and then expose it only for a short period of time and get it through. And Treasury could hurt that.”

The secrecy spread to hearings too. Unlike in 1985-1986, when bi-partisan tax bill drafters held 89 hearings with more than 2,600 witnesses, the House Ways and Means Committee held no hearings on the specifics of the bill it was drafting. The titles of the few hearings that were held were amorphous, like “How Tax Reform Will Grow our Economy and Create Jobs,” and the witnesses were by and large from inside the beltway. Keeping the bill from the public, and members too, was part of the plan.

Graphic by Pratheek Rebala, Center for Public Integrity

The death of ‘revenue neutral’

There are tax cuts and there is tax reform. For instance, President George W. Bush, in 2001 and 2003, pushed through tax cuts that cost the Treasury nearly $1.7 trillion over 10 years. Tax reform is supposed to be different. Classic tax reform does away with tax breaks and loopholes that have accumulated over the years and uses those savings to pay for tax cuts for all. If the savings balance the tax cuts, such reform is called “revenue neutral.” The 1986 Tax Reform bill passed under Reagan was revenue neutral. The 2014 Camp bill, often cited as the model for the 2017 act, was revenue neutral.

While the BAT, with its expected $1 trillion in revenue, was under consideration, it was hoped by many that the 2017 tax bill could be revenue neutral. But once the BAT died, revenue neutral died with it.

That wasn’t necessarily clear at the time, because there was still a cacophony of viewpoints on Capitol Hill. Some in Congress continued to insist on strict revenue neutrality. Others thought that Camp’s original bill would not cut taxes enough, and that borrowing to create growth was OK. “I borrow money in my own life to buy something of an ascending value. You take out debt to buy a house, you take out debt to expand your facility and so forth,” Roskam said. As time passed, this idea gained strength.

Former Rep. Peter Roskam, R-Ill., here at a College of DuPage event, was chairman of the House Ways and Means Subcommittee on Tax Policy and was instrumental in the drafting of the bill. He thought new deficits were justified if they would create economic growth and raise tax revenues. (College of DuPage/Creative Commons)

And what did revenue neutral mean anyway? The answer started to sound fuzzier and fuzzier.

On the Senate side, the issue was discussed at weekly member lunches in the Mike Mansfield Room, a grand dark-wood-paneled chamber in the Capitol decorated with a large crystal chandelier, golden sconces and oil paintings. There it was said that “dynamic scoring” and “current policy baseline,” those two terms buried in the 35 pages of the Ryan-Brady blueprint, would offset — some would say hide — the deficits in a tax bill.

Tax bills are evaluated by a process known as “scoring,” which analyzes how much tax revenue a bill will bring in and how much it may lose. It may be done by Congress’s official scorer on tax bills, the Joint Committee on Taxation (JCT), or by any think tank, ideologically tinged or not, that wants to be part of the debate.

Static scoring just assesses the actual numbers in a bill: taxes cut, taxes levied. But dynamic scoring tries to predict how much economic growth will be produced by the tax cuts, and how much tax revenue that growth will generate. That projected revenue can make deficits much smaller.

While it has become an accepted practice, not everyone thinks dynamic scoring is an intellectually honest approach. Here’s what Bruce Bartlett, a senior policy official in the Reagan and George H.W. Bush administrations said about it in 2013: “It is not about honest revenue-estimating; it’s about using smoke and mirrors to institutionalize Republican ideology into the budget process.” Still, it worked for the Trump administration, and Mnuchin endorsed it publicly on several occasions.

Treasury Secretary Steven Mnuchin, here at a Tax Day event on Tuesday, April 17, 2018, in Derry, N.H., insisted for months that the Trump administration’s tax-cuts plan wouldn’t benefit the wealthy, leading a tax expert working on the bill to claim Mnuchin was “not ready to lead tax reform.” (AP Photo/Elise Amendola)

The notion of “current policy baseline” was another way to mask deficits. A budget baseline considers government income and spending in a given year. Official baselines are derived from the actual tax and budget laws. If a tax cut expires in a certain year, it is counted as revenue that year for the baseline. That’s known as the “current law baseline.”

A current policy baseline, however, is based on assumption. It assumes that Congress will extend certain tax cuts in the years when they are due to expire, as it often does. So, if previously enacted tax cuts were due to expire, but one assumes that Congress will extend those tax cuts, then the same amount of tax cuts in a new bill that covers those years will have no cost.

Not everyone likes that approach either. Chye-Ching Huang, director of federal fiscal policy at the liberal Center for Budget and Policy Priorities, said in an interview that it was “yet another gimmick used to obscure the true cost of the tax cuts.”

Some members of Congress were intrigued by a third approach, known as “Camp scoring.” In 2014, the Joint Committee on Taxation ran a dynamic score on Camp’s proposed tax bill to see if it would generate economic growth and bring in more tax revenue. Different models brought different results, ranging from $50 billion in extra tax revenue over 10 years to $700 billion. Supply-side Republicans liked to cite the highest number — $700 billion. So, they argued that if they passed a Camp-like bill, they would generate $700 billion over 10 years in new revenue.

As these discussions — revenue neutral or not, dynamic or static scoring, current policy and Camp scoring — took place among the bill’s drafters, a certain mindset took hold: It’s OK if the bill is not deficit neutral if we get the tax cuts we want, and maybe it will create growth too. Said Roskam: “Look, there are some folks in my tribe that basically say, ‘Hey, every tax cut’s great. Can’t cut taxes enough. And it’s all hocus-pocus scoring.’”

“Look, there are some folks in my tribe that basically say, ‘Hey, every tax cut’s great. Can’t cut taxes enough. And it’s all hocus-pocus scoring.’” Rep. Peter Roskam

Among those gradually feeling less and less deficit guilt were Senate leaders. Finance Committee Chairman Hatch had for years been a self-avowed deficit hawk, who had supported more than 20 balanced budget amendments. “The national debt crisis poses a significant and growing threat to the economic and national security of this country,” he said Feb. 27, 2017, as he introduced another amendment. And yet just two months later, Hatch signaled that he was open to creating a deficit if the tax cut could stimulate the economy. Hatch did not respond to a request for comment.

Sen. Toomey of Pennsylvania, 58, was a member of both the Budget Committee that would decide how much debt the tax bill could create and the bill-writing Finance Committee. The former Wall Street banker had long been supported by the tax-cutting PAC Club for Growth. In 2001 he had proposed a budget that would cut taxes by $2.2 trillion in 10 years, more than George W. Bush’s $1.7 trillion in tax cuts. In 2011 he had sponsored a balanced budget bill. But by now he was an unabashed supply-sider.

Toomey began sharing a balance sheet with other senators. On one side were all the tax cuts they wanted to make. On the other side were all the likely sources of revenue. The difference: a $2.5 trillion deficit over 10 years.

Toomey said he was just being logical. To make the tax cuts they wanted, tax reform would have to run in the red.

Turning points

On Sept. 13, members of the Senate Budget Committee met with Mnuchin and Trump economic adviser Cohn to work on their budget plan. By then, their plan was key to passing any tax bill, because it would hold the instructions for reconciliation. The House had already released its reconciliation instructions: they said a tax bill had to be revenue neutral. Now it was the Senate’s turn: they might agree, or they might write instructions that allowed for a big new deficit. Senators emerged from their meeting without a decision.

The Senate Budget Committee was polarized. On the one end was Toomey, who thought a tax bill that created as much as $2.5 trillion in deficits over 10 years was just fine. Mnuchin was pushing for the same number. At the other end was deficit hawk Sen. Bob Corker from Tennessee. But, it would turn out, there were also some sleight-of-hand options.



Sen. Patrick Toomey, R-Penn., left, and Sen. Bob Corker, R-Tenn., chat before a Senate hearing in 2016. Toomey and Corker, in a crucial meeting in September 2017, decided that the tax bill could create a deficit of $1.5 trillion over 10 years. The negotiated deal saved the tax bill. The meeting lasted all of 10 minutes. (AP Photo/Evan Vucci)



The silver-haired 65-year-old Corker, elected to the Senate in 2006, had gained a reputation as a thoughtful lawmaker more interested in policy than politics. He was no Trump fan, having criticized him for leadership failure after the riots in Charlottesville, Virginia. Corker had another advantage in speaking his mind: He was not worried about political survival, as two weeks later he would announce his retirement from the Senate.

As the chairman of the Senate Foreign Relations Committee, Corker had often remarked that the deficit was the “greatest threat to our nation” — greater, even, than North Korea, he said. At the time, the accumulated national debt was $20 trillion and growing, and annual interest payments topped $300 billion, threatening spending on defense, Medicare and Social Security. Corker was a proponent of pro-growth tax reform and making corporate rates internationally competitive. But, he told the Center that “the Republican conference knew that my primary focus was on trying to ensure that we did so without creating a deficit.” New deficits would only hike the long-term debt.

Corker’s position on the tax-bill deficit was it should be zero, no deficit at all, revenue neutral.

And Corker’s vote was critical. The Budget Committee only had 12 Republicans to 11 Democrats. If one Republican defected, the budget bill — with the critical reconciliation instructions — would not pass. The Republican senators knew that they needed to convince the strict deficit-hawk Corker that they had to roll up a trillion-dollar-plus debt to enact the deep corporate and individual tax cuts they wanted. Without Corker’s buy in, which wasn’t assured, hope for a tax-cuts bill would certainly die. And Republicans would have to face angry donors over another legislative failure.

“We certainly knew that the stakes were so high at this moment in time that if we didn’t get past this that it would have been a tremendous set back,” said a source knowledgeable about the negotiations.

On Sept. 19, McConnell called Toomey and Corker to his spacious Capitol office suite which overlooks the National Mall. Flanked by a fireplace, with an oversized gilt-edged mirror perched above the mantle, they settled into chairs around a coffee table. McConnell told them to work together to come up with an acceptable number for the likely spending-over-revenue debt the tax bill would create.

Toomey’s position was well-known: $2.5 trillion. Corker had listened to Toomey and Mnuchin. He had come to believe that $500 billion of deficit could be covered by using the current policy baseline, and he was persuaded that something modeled on the 2014 Camp bill would produce $700 billion in revenue. That totaled $1.2 trillion. If the dynamic scoring for the new tax bill would come in a little higher than Camp, say $1 trillion, it could combine with the current policy number to cover what on paper looked like a $1.5 trillion deficit. They could even argue that the bill was revenue neutral.

Those involved in the negotiations said Corker was feeling intense political pressure to come to an agreement. He could have been viewed — as McCain was when he cast the vote that ended the repeal of Obamacare just months earlier — as the GOP senator who killed tax-cut legislation. In the end, Corker said he could go with $1.5 trillion in new debt. And so that was the number. The meeting had taken all of 10 minutes — 10 minutes that proved to be the turning point for the whole tax bill.

Trier said he learned of the $1.5 trillion number as the public did, from news reports that day. He was stunned. “Everything changed at that point,” he said. A tax bill could pass.

“Everything changed at that point.” Dana trier

Here’s why: First, to pass a revenue-neutral tax bill, you must enact new taxes or take away tax breaks to pay for tax cuts. The more people or companies are hurt, the more they pressure Congress to reject legislation. And so the $1.5 trillion deficit saved $1.5 trillion in pain. (Anti-deficit advocates have few if any lobbyists.)

At the same time, Congress was closing in on a corporate tax rate near 20 percent. Ryan told an event sponsored by The New York Times on Sept. 7 that they were trying to get to the industrial world average of 22.5 percent. Now, the willingness to accept a $1.5 trillion deficit meant that the 20 percent corporate rate, which would cost the U.S. Treasury about $1.35 trillion, could actually happen — if the House would agree to the Senate’s deficit plan.

Off to camp

They called it “tax camp.” On the morning of Sept. 27, House Republicans boarded buses in front of the Capitol for a short ride to Ft. Lesley McNair, a former War of 1812 arsenal at the confluence of the Potomac and Anacostia rivers in Southwest Washington, whose imposing buildings date to the turn of the century. On this day, the House and Senate bill-writing committees and the White House were releasing their nine-page “Unified Framework for Fixing Our Broken Tax Code,” which outlined what they were working on. For the first time, the public and, indeed, most of Congress would learn what their leaders were doing. Tax camp would provide the detail.

Fort. Lesley McNair, where House Republicans learned details of the tax bill. (Mr.TinDC/Creative Commons)

At Fort McNair, between a breakfast of coffee and danishes and a lunch of Chick Fil-A, the group split in half. Ways and Means Chairman Brady took one group to an auditorium to explain the business provisions they were working on, while Tax Policy Subcommittee Chairman Roskam took the others to a large classroom to talk about the individual provisions. When they finished, they switched audiences.

After that, it was open mic time. Roskam said he was surprised. Given the unruly nature of House members, and the numerous caucuses with their different agendas, he expected the usual grandstanding and posturing. Instead, “their comments were an honest critique, thoughtful critique,” he said. “Have you considered this? Can we consider that? How about this?”

Roskam could read between the lines. What he heard, he said, was, “Hey man, I’m going to vote for this bill. I’ve already made up my mind that I’m going to vote for this bill.”

Implicit in this was the idea that, if the bill was going to pass, the House would drop its insistence, written into its budget in July, that it had to be revenue neutral. And so drop that condition it did. One month later, on Oct. 26, by a 216-212 vote, the House adopted the Senate’s reconciliation instructions with their $1.5 trillion deficit.

Why did the House fold? Once House members had lost the BAT, they knew that they could not get to revenue neutral, said a source close to the process. He summarized their thinking starkly: “We don’t have a way to pay for this, so let’s not pay for it.” Roskam’s view is a bit more nuanced. He said a solid contingent in the House believed that, if it would create economic growth, borrowing was okay.

There was one other element behind Republican thinking: Both the non-partisan Tax Policy Center and the conservative Tax Foundation had said that if the bill were going to be revenue-neutral and there were no BAT, the most they could cut the corporate rate to 28 percent.

Jim Cramer, host of CNBC’s “Mad Money,” would later say in a TV interview, “We thought that there was this disciplined group of Republicans, who would never go for what some people are saying is a budget bust.” The deficit hawks, he said, “folded like a cheap suit.”

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Lobbyists cannot be denied

As the two bills were being written, and despite Republican efforts to keep them at bay, lobbyists were making inroads. The biggest single prize was the 20 percent corporate tax rate won by the RATE coalition (later increased to 21 percent). But there was more: Businesses wanted to depreciate their capital expenses in just one year, not over many years as in the past. Real estate developers wanted to take a 100 percent depreciation on their properties, too. Corporations wanted to get rid of their Alternative Minimum Tax (AMT), which required them to pay at least 20 percent tax on profits. Wealthy people didn’t like their AMT either.

Small businesses, whether mom-and-pop shops, car dealers or huge multibillion-dollar companies, wanted a cut. Bigger firms, like the construction giant Bechtel, had their own agenda. They all were set up as so-called “pass-throughs,” meaning they did not pay taxes at the company level but passed their profits through to their owners. Unlike major corporations, their profits were only taxed once. The House would devise one way to benefit them, the Senate another.

The biggest lobby for small business was the National Federation of Independent Business (NFIB). It weighed in heavily on both the House and Senate pass-through plans, which took different approaches. The S Corporation Association, named after a chapter of the tax code that deals with taxing limited partnerships and covers 4.7 million businesses nationwide, also lobbied hard for a pass-through deduction.

The final bill allowed certain categories of pass-through owners to deduct 20 percent from their earnings for tax purposes, creating an effective top tax rate of 29.6 percent for those people. But other owners were not so favored, leading to confusion and criticism from the owners themselves.

The NFIB and its hired lobbyists did not respond to requests for comment. Brian Reardon, president of S-Corp, declined to comment.

Hours before the Senate passed the tax bill and sent it to Trump to sign, S-Corp sent a note to Republican Sens. Ron Johnson from Wisconsin, Steve Daines from Montana, and James Inhofe from Oklahoma, thanking them for standing up for Main Street businesses.

“Because of your efforts, the final conference agreement included a number of improvements, including provisions directly aimed at addressing the ability of pass-through businesses and their workers to remain competitive here at home and internationally,” the letter stated.

Other lobbyists succeeded in pushing brand-new tax breaks. There was a tax break for citrus growers, so they could deduct the cost of replanting due to a freeze or disease. Like-kind exchanges, in which the capital gains from the sale of something can be invested in something similar (exchanged) with no tax consequences, were repealed — but not for real estate. There was a new limit on how much interest corporations could deduct, but real-estate developers and utilities were exempted. There was a provision that cut taxes for small craft brewers from $7 to $3.50 a barrel. Private jet services were exempted from the 7.5 percent ticket tax paid by commercial carriers. The White House said it wanted to get rid of the carried interest provisions that helped hedge fund managers — Trump had pledged to eliminate them — but in the end Congress was no match for the hedge fund lobby.

The provisions were not all forged by lobbyists. Even with the cushion of a $1.5 trillion deficit, Republicans needed to raise more revenue — and targeted liberal leaning institutions and states. Private universities were nailed with a 1.4 percent tax on their endowments. People in high-tax East and West Coast states were disproportionately affected by having their state and local tax deductions limited. Nonprofits had to pay a new tax if they paid their officials more than $1 million. The law took away tax benefits worth up to $20 a month for bike commuters. Incentives shrunk for contributing to large and small charities alike.

A new international tax approach was seen as a possible source of revenue, and the Senate worked this angle hard. “The 21 percent corporate rate was surprising,” said Marty Sullivan, editor of Tax Notes, a tax industry newsletter. “They paid for it by going ballistic on the international provisions.”

It was not hard to change the international rules, as multinationals had chafed for years under high U.S. taxes on their foreign profits. They would get lower rates — but would have to pay some new taxes too. What they got was: tax-free dividends from their foreign subsidiaries, and a one-time low tax on the money that they had stashed overseas. They were taxed on income from intellectual property, but at a low rate. The new rules were complex. Some were old ideas, but others like one that taxed the money that multinationals were moving to affiliates in lower tax countries, were brand-new. That one, experts said, was done way too quickly. “Dozens of loopholes and dozens of traps for the unwary. It just can’t be fixed,” said Sullivan of Tax Notes.

Meanwhile, the Senate was doing all this with little help from Trier and his Treasury team. “We were working to correct stuff on the House side, and it actually went backwards in the Senate!” he said.

There were unintentional mistakes as well. Churches and synagogues were hurt by an effort to tax fringe benefits paid by nonprofits. Private universities that paid officials and coaches more than $1 million were taxed on the excess, but many public colleges escaped the tax. Restaurants and retailers were cut out of the capital expensing bonus available to others. Farmers were allowed to take a 20 percent deduction on profits from selling to farmers’ grain co-operatives, but not to other wholesalers. The wholesalers howled.

And there was yet one big surprise. Stung by their serial failures to repeal Obamacare, many House Republicans did not want to touch it again. But the Senate was not so timid. Toomey and Sen. Tom Cotton, R-Ark., began to push for the repeal of the so-called “individual mandate” tax, which required people without health insurance to buy it or pay a penalty. Lower income individuals could receive federal subsidies to do so. The argument was, a repeal would lose the income from the tax, but it would save the cost of the subsidies — a net plus of $314 billion. In the views of Republicans, this was a trifecta: No longer would people be forced to buy insurance they did not want, the savings could be counted as Treasury income, and Republicans would finally have a minor health-care victory. It went into the Senate bill.

All of these provisions started in one chamber or the other, but they all ended up in the final bill. As the bills headed toward a formal conference, Howard Gleckman, a senior fellow at the Tax Policy Center, wrote that the two bills were “filled with provisions that simply make no sense as tax policy.” The bills seemed to have only three goals, he wrote: “Cut tax rates for corporations and non-corporate businesses, add no more than $1.5 trillion to the budget deficit over the next 10 years so a measure can be enacted on a partisan basis using special budget rules, and pass a bill — any bill.”

A mad scramble and a mess

On Nov. 2, 2017, the House formally introduced its bill. For many, including members in both houses, it was the first they had seen actual legislation. Two weeks later, as predicted by Roskam, the House approved it, 227-205. The Senate released its bill on Nov. 9, but that process was a little more complicated. After the Finance Committee marked up the bill and approved it on Nov. 16, the Senate Budget Committee then had to approve it as well.

By then, Corker was growing squeamish. Even as the bills arced forward, no one knew what the Joint Committee on Taxation was going to say about them. Corker was hoping the JCT would match the score predicted by the supply-side-boosting Tax Foundation. It had reported the bill would generate $1 trillion in tax revenues. But other estimates had come in much lower.

These worries caused Corker to propose the idea of a trigger. He and other GOP senators — James Lankford from Oklahoma, Jeff Flake from Arizona, and Jerry Moran from Kansas — pushed for a mechanism that would kick in if future revenue did not come in as projected. It could raise taxes in various ways to generate up to $350 billion.

Corker was the swing vote on the Senate Budget Committee. He extracted promises from Senate leaders that if he voted the bill out of committee and to the floor, they would all work to insert his trigger mechanism. “I am encouraged by our discussions,” he said at the time. The bill went to the floor.

On Nov. 30, just one day before the scheduled Senate floor vote, the JCT issued its long-awaited dynamic score: The tax bill would only generate $407 billion in offsets — a far cry from the $1 trillion predicted by the Tax Foundation. Corker and his like-minded colleagues were stunned. They were hoping the JCT estimate would hit the $1 trillion mark in new revenue, and they could add on to that the $500 billion “saved” though current policy accounting. This would take care of the $1.5 trillion deficit. The new math, though, was both daunting and embarrassing. JCT was saying the bill would only create $407 billion, nearly $600 billion short of the $1 trillion they had hoped for and $1.1 trillion short of deficit-neutral.

“I was not happy,” Corker told the Center. “It made me dig in even more on the trigger.”

But there was no stopping now. As the tax bill made its way toward a full Senate vote, a special madness ensued. The printed bill, 479 pages and three inches thick, did not even surface until after sunset on Dec. 1, when it first appeared in the offices of K Street lobbyists. Not a single Democrat had seen it. Most Republicans hadn’t seen this rewritten version either. Last-minute changes in the legislation were written into the margins. “One page literally has hand scribbled policy changes on it that can’t be read,” tweeted Democratic Sen. Jon Tester of Montana.

The Tax Cuts and Jobs Act moved so quickly through Congress in late 2017 that last-minute changes to the Senate bill were hand written into the margins. “One page literally has hand scribbled policy changes on it that can’t be read,” tweeted Democratic Sen. Jon Tester of Montana. (AP Photo/Jon Elswick)

Five whole pages were crossed out, eliminating a 25 percent tax deduction for tuition for religious instruction. Margin notes changed the eligibility for child tax credits. Others altered the tax treatment of pass-through corporations that want to convert to C corporations. In some copies, whole words were missing.

As the Democrats squawked, GOP leaders were counting votes. In the 52-48 Senate, if they could not count on Corker, they could lose only one other senator. So into the bill went a provision for a $2,000 child tax credit, demanded by Sen. Marco Rubio, R-Fla. Into the bill went the sale of oil and gas leases in the Arctic National Wildlife Refuge, long sought by Alaska Sen. Lisa Murkowski. Sen. Ron Johnson, R-Wis., obtained assurances that pass-through businesses would get favorable treatment either on the floor or in the conference bill. Sen. Jeff Flake, R-Ariz., got a promise (later not upheld) that travel restrictions to Cuba would be relaxed via another bill.

Everyone was getting what they wanted — except Corker. The Senate parliamentarian ruled that Corker’s trigger could not be considered. Apparently, it violated the strict rules of reconciliation because it did not immediately create “outlays or revenues.”

So, Corker voted against the bill. “I wanted to get to yes,” he said at the time. But he added that he could not vote for legislation that “could deepen the debt burden on future generations.” He was particularly opposed to the bill’s individual tax cuts, which he told the Center “were a buy-off of the American people and wouldn’t have anything to do with growth.”

Corker stood alone. With only his defection, the bill passed 51-49.

“They were in such a rush to get it done by Christmas,” Trier noted. “When McConnell said, ‘We’ve got the votes,’ they just went for it.”

Too many provisions, too little time

As the conference committee set out in early December to marry the Senate and House bills, stakeholders made sure the pressure was maintained. Only a couple of weeks earlier, Republican Rep. Chris Collins of New York had told reporters, “My donors are basically saying, ‘Get it done or don’t ever call me again’.”

While both bills created deficits of slightly under $1.5 trillion over 10 years — which was required by reconciliation rules — big differences remained. The Joint Committee on Taxation reported there were 105 provisions unique to one bill or the other, and 131 other provisions that differed substantially. Even though both houses had based their bills on the Camp drafts, only 41 provisions were the same.

Normally, turning this into one bill would take weeks of work. Democrats charged the conference had already started in secret among the GOP’s House and Senate leaders, back even when the Senate bill was being debated on the floor. “This isn’t going to be a real conference,” Drew Hammill, a spokesman for House Minority Leader Nancy Pelosi, D-Calif., told USA Today. The GOP House and Senate conferees are “going to pre-negotiate everything and then jam it down our throats.” The conference, after all, was ruled by a Republican majority, 17-12.

When the bills were blended, the result was not unlike the camel that is a horse designed by a committee. For instance, deductions for state and local taxes were capped at $10,000, but not eliminated. Estate taxes were not eliminated, but the threshold exemption was raised to $11.2 million. The provisions for pass-through businesses were blended into a confusing formula that benefited some professions but not others. Sullivan of Tax Notes called this part “a travesty.” Trier termed it a “feast” for tax-planning lawyers.

And then there were the last-minute provisions, some costing more money than was planned. On Dec. 2, Blackstone CEO Stephen Schwarzman hosted a $100,000-a-plate fundraiser for President Trump at his New York apartment. Some of the two-dozen wealthy donors there reportedly complained that the tax bill would hurt them personally. Two weeks later, when the bill made it through conference, the top tax bracket rate had been cut from 39.6 percent to 37.

President Trump also insisted that corporate tax cuts start immediately, and not be postponed for a year. Rubio’s child tax credits were expanded. In the end, the corporate rate had to give, and it was bumped up from 20 to 21 percent to pay for the additions.

The final bill made 63 major changes to the business tax code; 13 applied to the insurance industry alone. Twenty more complex changes created a whole new way of taxing international business. Thirty changes in the tax law affected individual taxpayers. Yet many sections had inadvertent loopholes that could be gamed by the savvy or the well-represented. Thirteen tax law professors from around the country, in a 68-page study, blasted “a rushed and secretive process” that resulted, they said, “in deeply flawed legislation.”

What would the latest version of the tax bill cost America? The Joint Committee on Taxation was the official scorer, but Republicans were moving the bill so fast that the JCT could not catch up. The JCT had done that last-minute scoring of the Senate’s bill, which stunned Corker and others concerned about the national debt with the news that their bill was $1 trillion short of being revenue-neutral. But the bill emerging from the conference committee was substantially different.

As the conferees finished up, the JCT was working furiously. But it was too late. The JCT finished its report Dec. 22, the day Trump signed the bill into law. The JCT report said that even if growth were created by the tax cuts, the tax act would add nearly $1.1 trillion to the national debt over 10 years. Not a single lawmaker saw that report before voting.

The Senate passed the conference report, 51-48, and the House concurred, 224-201. Even Corker voted for the conference bill. He had convinced himself that the combination of the Tax Foundation’s dynamic scoring ($1 trillion in revenue from economic growth) and the current policy baseline adjustment ($500 billion) would negate the $1.5 trillion deficit. He called it “a vote on America and on growth.”

The House did not wait for the JCT and “instead relied on any private estimate that suited its fancy, without the slightest consideration of that unvetted private model’s biases or shortcomings,” wrote former JCT chief of staff Ed Kleinbard. “The Senate essentially did the same.”

“This is the biggest tax cuts and reform in the history of our country. This is bigger than, actually, President Reagan’s many years ago. I’m very honored by it.” President donald trump

The bill was now law. “This is the biggest tax cuts and reform in the history of our country. This is bigger than, actually, President Reagan’s many years ago. I’m very honored by it,” Trump said, with typical exaggeration.

White House economic adviser Gary Cohn said weeks before the bill reached Trump’s desk, “The most excited group out there are big CEOs.”

‘Unfortunately, … I was honest’

Seven weeks after the tax act became law, Dana Trier spoke at an American Bar Association tax section luncheon in San Diego. As he was Treasury’s chief tactician for the bill, the audience of tax lawyers hung on his every word. “Unfortunately, that day,” he would later say, “I was honest.” When asked about the bill’s pass-through provisions, he said they would be a “feast” for tax lawyers. He recalled being asked about a flawed part of the carried interest provisions: “I said something like, ‘This statute — referring to the carried interest provision — is not a paragon of sophistication.’” His comments were widely reported, and some thought he was talking about the whole bill. Trump administration officials called him on the carpet. On Feb. 23 he resigned.



Trier said that there were good themes in the bill. He sees the “territorial” approach to international tax, even though flawed, as a start. Lower taxes for business and immediate write-off of some investment appealed to Trier’s pro-growth instincts. But in interviews with the Center, he expressed disappointment with how the bill turned out. Parts were not well thought through and “known problems” were not corrected because of the speed with which it passed.

“So, I mean, I want to be honest with you, I was completely sick,” Trier said. “You know from my perspective, I took one for the team and my reason for taking one for the team had not been fulfilled. I thought I could make it work. I could be one of those people who could help make it work. And in fact, we didn’t reach my standard.”