“That sounds like a kind of reasonable idea,” Senate Majority Leader Mitch McConnell said. | Timothy D. Easley/AP Photo Corporate rate cut in tax bill could change as GOP hunts for votes

Congressional leaders, facing pressure to add expensive items to their tax reform legislation, could end up settling on a smaller corporate tax rate cut than originally envisioned.

In a closed-door meeting Wednesday with CEOs from the Business Roundtable, Republican Sen. Pat Toomey and White House economic adviser Gary Cohn in separate sessions told the crowd their strong preference was to keep the corporate rate at 20 percent, where it is now in the legislation, even as lawmakers were under intense pressure to find new revenue, according to three people familiar with the meeting.


Both men left the crowd with the impression that the corporate rate was a target in the hunt for that revenue and could rise as a result.

President Donald Trump broached the possibility of a 22 percent corporate rate over the weekend. A source familiar with negotiations between the House and Senate said lawmakers don’t want to raise it to 22 percent, calling it a “last resort.”

Both Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan are unhappy with Trump opening the door to the higher rate, the source said, because it undermines all the work people have been doing to get to 20 percent.

Each percentage point the corporate rate increases is worth about $100 billion over a decade. The top corporate rate is now 35 percent.

In the discussion with executives, Toomey touched on the pressures lawmakers are facing on the corporate and individual sides, including the need to placate lawmakers from high-tax states who oppose scaling back the state and local tax deduction.

Toomey told reporters Wednesday that he thinks a 22 percent corporate rate "is not likely to happen."

“We all understand that there’s some things that are going to have to change," he said, referring to the state and local tax deduction and a provision -- called the corporate alternative minimum tax -- that businesses want to get rid of. "So we’ve got to figure out how to do that.”

McConnell said Wednesday he was open to making the provision on state and local tax deductions more generous to win over numerous House Republicans when the two chambers merge their tax bills in the coming weeks. But McConnell has also adamantly opposed going above a 20 percent corporate tax rate.

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The Senate's top tax writer said he didn't think a 22 percent rate was in the cards.

“Not as far as I’m concerned — we’re still at 20,” said Senate Finance Committee Chairman Orrin Hatch (R-Utah).

Boosting the corporate tax rate could open a floodgate of other demands from lawmakers seeking to get provisions in the tax bill. Sen. Marco Rubio (R-Fla.), for instance, told POLITICO on Wednesday that if the rate goes up to 22 percent "and they don’t use some portion of it to help" boost the child tax credit, "I’m going to have a big problem.”

During the Senate’s consideration of the legislation on Friday, Rubio offered an amendment that would have moved the corporate tax rate to 20.94 percent and used the savings to make the child tax credit refundable against payroll taxes. It was defeated by his colleagues as Republicans held the line on a 20 percent rate.

The Senate named negotiators on the tax bill Wednesday after a 51-47 vote to go to conference — the process to merge the Senate and House tax bills.

Amid the talk about the corporate tax rate, McConnell said he would consider making changes to the state and local tax deduction provision in the legislation. Some House Republicans, particularly from high-tax states such as California, want language that would allow taxpayers to deduct up to $10,000 of either their property or state and local income taxes. Both the Senate and House bills include the property tax provision, which was aimed at winning support from GOP lawmakers from states such as New Jersey and New York.

“That sounds like a kind of reasonable idea,” McConnell told radio host Hugh Hewitt of allowing the deduction to apply to income tax as well. “There are a lot of these things that are floating back and forth, and it’s just impossible for me on your program or frankly to anybody else at this point to predict exactly how the final product turns out.”

A senior Trump administration official said the White House is open to the idea, but that paying for it would be a challenge.

The House's top tax writer, Ways and Means Committee Chairman Kevin Brady (R-Texas), said Wednesday that he's asked the Joint Committee on Taxation to estimate the budgetary impact of the move.

The fate of the overall deduction, commonly referred to as SALT, has been an issue for months. Republican leaders mollified lawmakers from the Northeast by restoring the property tax deduction, though with a lower cap. But House Republicans from California, which has the highest state income tax in the country, are concerned eliminating the income tax portion of the write-off could mean a net tax increase on some of their constituents. Several voted for the House tax reform bill on the promise that more would be done to fix it.

Californians would not benefit as much from the bills' current language on property taxes because the state already caps those taxes. Brady has said for days that he would like to offer more benefits to taxpayers in California, the home state of House Majority Leader Kevin McCarthy.

Some California Republicans, however, say the plan under discussion doesn’t go far enough.

“It ain’t going to do it,” said Rep. Darrell Issa, so he’s still planning to vote against the tax bill.

His counter: a 10 percent allowance, to let taxpayers deduct all their state and local taxes up to 10 percent of their overall income.

“The problem is $10,000 doesn’t get you there; 10 percent does,” Issa said. “Then there would be some level of fairness because every state would have a different mix, every taxpayer would have a different mix, but the cap would be reasonable.”

Issa was one of three California Republicans who voted against the tax bill when it passed the House last month. Another "no" vote, Rep. Dana Rohrabacher, said he’s still judging alternatives that are being floated in conference.

“My constituents understand that having to pay taxes on any money that’s already been taxed by the state government is double taxation,” Rohrabacher said.

With polls showing the GOP bill to be overwhelmingly unpopular in California, protests over the plan, including the SALT limitation, have reached across the state in recent days, to formerly solid GOP strongholds like Orange County. Just 27 percent of likely voters in California favored the elimination of state and local tax deductions in a recent poll by the Public Policy Institute of California.

In 2014 alone, the SALT deductions slashed Californians’ taxable income by a whopping $101 billion — more than twice that of second-place New York, according to the nonpartisan Tax Foundation. In the state that contributes more than any other to the federal coffers in taxes, Californians alone claim 17 percent of nation’s SALT deductions.

California Democrats are using the measure as a cudgel against the GOP. Democrats challenging Republicans in several fiercely contested Southern California districts have used the tax bill in fund-raising appeals and in an effort to draw publicity to their campaigns.

Other ways that Brady said could offer more tax relief to California, aside from allowing the $10,000 property tax deduction to apply to income taxes, would be to funnel more relief through the child tax credit or tax brackets.

But Brady also acknowledged that the sort of fixes Republicans were discussing would come with a pretty sizable price tag. Paying for it depends on setting priorities, he said.





The business community is already lobbying Republicans to ensure a final tax bill repeals the corporate AMT, another change that would require the GOP to find more offsets. The Senate ultimately kept that provision, which is meant to ensure that corporations pay a minimum amount of taxes. Business groups have said keeping it would effectively repeal key tax incentives, like the credit for research and development that has broad bipartisan support.

GOP conferees named by the Senate include Hatch and several other members of his committee: Sens. John Cornyn of Texas, John Thune of South Dakota, Rob Portman of Ohio, Tim Scott of South Carolina, Pat Toomey of Pennsylvania and Mike Enzi of Wyoming, who also chairs the Senate’s budget panel. The group also includes Sen. Lisa Murkowski of -Alaska, which would benefit froma provision to allow drilling in a long-protected part of the state.

The names of the Democratic conferees weren't immediately available. The House named its conferees on Monday.

Colin Wilhelm, Aaron Lorenzo, Brian Faler, Carla Marinucci and Matthew Nussbaum contributed to this report.



CORRECTION: The original version of this story misstated what Sen. Pat Toomey and White House economic adviser Gary Cohn said at a closed-door meeting of executives about the possible fate of the corporate tax rate. They did not specify that it could rise to 22 percent.