The changes, in a revamped plan unveiled late Tuesday by Finance Chairman Orrin Hatch, are designed to comply with arcane budget rules barring the legislation from adding to the debt over the long term. | John Shinkle/POLITICO New Senate tax plan hands ammunition to Democrats Hatch's revised legislation would make individual tax cuts temporary, business cuts permanent.

Senate Republicans are on the defensive after proposing to only offer temporary tax cuts to millions of Americans as part of a revised plan to overhaul the tax code.

While they want to make a host of business tax cuts permanent, they would make reductions in tax rates, expansions of the standard deduction and child tax credit, and other provisions expire after 2025.


Meanwhile, the legislation drew its first Republican opponent — Sen. Ron Johnson of Wisconsin, who complained about its treatment of "pass-through" businesses whose owners pay taxes on their companies through the individual side of the tax code. His announcement was notable since Republicans could only afford to lose two votes if Democrats are unified in opposition to the plan, though he didn't rule out supporting it if the provision is further modified.

The changes to the Senate plan, unveiled late Tuesday by Finance Chairman Orrin Hatch, are designed to comply with arcane budget rules barring the legislation from adding to the debt over the long term.

While Republicans can cut taxes by $1.5 trillion over the next decade, they cannot add even a nickel to the deficit after that. So the plan aims to abide by that rule by turning off the individual tax cuts, much like former President George W. Bush’s tax cuts had an expiration date.

That means Congress would face yet another showdown in the coming years over the fate of the provisions, just as they did with the Bush tax cuts.

Republicans say they have no intention of allowing those provisions to lapse, and that future lawmakers will surely extend them.

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But they are being attacked by Democrats — already unhappy with plans to attach a repeal of the Affordable Care Act’s individual mandate — who are now accusing Republicans of siding with big business over average Americans.

“This is the bill you write if you want to build a tax code around a double standard,” said Sen. Ron Wyden, the top Democrat on the tax-writing Finance Committee. “The corporate tax breaks are permanent — written in ink, set in stone, locked in place with the key thrown away. But families have to settle for temporary tax cuts.”

Republicans countered that Democrats could vote with them to waive those anti-debt rules, and make the individual provisions permanent. That would take 60 votes on the Senate floor.

“We can make the individual side permanent — all it takes is a few Democrats to vote with us to do that,” Sen. John Thune (R-S.D.) said.

Other Republicans are unperturbed, saying what’s important, when it comes to promoting jobs, is making the business provisions permanent.

“I understand the slogan that the other side is going to have relative to this,” said Bob Corker (R-Tenn). But “from the standpoint of what really drives the economy, it is that business side.”

Added Lindsey Graham (R-S.C.): “I’d like to make them permanent, but we’ll just come back at them again” later.

The debate comes as the chamber’s tax-writing committee considers scores of other revisions Senate Republicans are making to their tax-rewrite plan. They’ve added 44 new provisions — dealing with everything from the tax treatment of student loans when a borrower dies to a tax break subsidizing the construction of low-income housing — along with 16 modifications to previously offered proposals.

A description of the changes released last night by Congress’s nonpartisan budget scorekeepers runs 103 pages.

The Finance panel, which began debating the legislation on Monday, aims to wrap up work on the plan by the end of this week. In the House, Republicans plan to give final approval to their competing tax draft Thursday. They hope to get compromise legislation to President Donald Trump’s desk by the end of the year.

Hatch's revisions are designed to not only comply with the Senate’s so-called Byrd rule on debt, they are also aimed at assuaging concerns from fellow Republicans with the plan Hatch unveiled last week.

The new plan strays from Republicans’ tax-reform ideals, as well as the House’s plan for the tax code, by not only making many provisions temporary. Republicans have long said one of the purposes of tax reform is making as much of the code permanent as possible.

The revised plan also includes a number of narrowly targeted provisions — benefiting groups citrus growers and other farmers, craft brewers, people who put on theatrical productions and others — that tax reform is supposed to stamp out.

In apparent response to complaints by Sens. Marco Rubio and Mike Lee, Hatch is now proposing a bigger child tax credit, worth $2,000, up from the $1,650 he had wanted. It is currently $1,000 per child.

Hatch is also slightly reducing some of his proposed income tax rates — his 25 percent bracket, for example, would fall to 24 percent while replacing a 22.5 percent bracket with a 22 percent one — while modifying the thresholds at which they’d apply.

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“While they may seem like small changes, these modest rate reductions — along with the additional expansion of the child tax credit — will let us channel even more tax relief to the middle class,” Hatch said.

Other revisions would allow people to set up tax-advantaged 529 college savings accounts for unborn children, and expand a tax break for teachers that House Republicans have proposed deleting from the code.

On the business side, there are provisions aimed at making it easier for so-called pass throughs — whose owners pay taxes on their businesses through the individual side of the tax code — to claim Republicans’ reduced business rate. They are also offering businesses a new, temporary tax break for offering employees family and medical leave. Silicon Valley firms would lose a cherished break allowing them to deduct the cost of meals provided to their employees.

The legislation would also toughen the proposal’s so-called anti-base erosion rules such as increasing a proposed tax on “intangible” income on things like patents that multinationals can easily book in other countries, beyond the jurisdiction of the IRS.

Republicans are using a repeal of Obamacare’s individual mandate to have health insurance as a way to help make their tax math work, and arguing it would amount to a tax cut for low-income people.

“We are going to repeal the tax on poor Americans,” said Sen. John Cornyn (R-Texas), the chamber’s deputy leader. “That will be a huge influx of money into their pocket that right now they’re having to pay the federal government.”

Budget scorekeepers say it would raise $318 billion over the next decade because, while the government would no longer collect penalties from people for failing to have insurance, that would be outweighed by the savings accrued by fewer people signing up for federally subsidized coverage.

Wednesday morning, the influential small business lobby National Federation of Independent Business endorsed the plan, saying it would "provide appropriate tax relief for America's small businesses." The group had been holding out on endorsing a tax plan until its concerns about pass-throughs were addressed.

But Johnson said pass-throughs were still disadvantaged in the Senate and in a separate House plan compared to corporations.

“These businesses truly are the engines of innovation and job creation throughout our economy, and they should not be left behind. Unfortunately, neither the House nor Senate bill provide fair treatment, so I do not support either in their current versions," Johnson said. "I do, however, look forward to working with my colleagues to address the disparity so I can support the final version.”

But another Republican member who’s thrown curveballs to his leaders in the past, Sen. Rand Paul (R-Ky.), signaled his backing for the bill.

He’s “a likely yes,” Paul told reporters outside the Senate floor on Wednesday.

Aaron Lorenzo contributed to this report.