Senate Republicans passed a dramatic overhaul of the American tax system early Wednesday morning, putting the plan another House vote away from President Donald Trump's desk after Senate rules forced them to make last-minute changes.
The chamber approved the proposal by a 51-48 party line vote, with every GOP senator voting for it except for the absent Sen. John McCain, R-Ariz. After approving a nearly identical bill earlier Tuesday, the House wants to pass the legislation that cleared the Senate on Wednesday morning.
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The plan, expected to get signed into law by Trump this week, would significantly remake the U.S. tax code. The bill would slash tax rates for businesses while temporarily trimming the tax burden on most, but not all, individuals.
Trump cheered the bill's passage in a tweet early Wednesday, saying a news conference will take place in the afternoon if the House approves the plan.
The GOP contends that the more than $1.4 trillion in tax cuts contained in the bill will spark business investment, hiring and wage growth. Democrats call the Republican proposal a giveaway to corporations at the expense of the middle class, expressing concerns about the $1 trillion or more it is projected to add to federal budget deficits over a decade.
The Senate GOP kept all of its members in line to approve the legislation after navigating party fractures and a member's absence in recent weeks. Republican leaders had to make policy changes or promises during the tax debate to appease at least five GOP senators who ended up supporting the bill.
Republicans, facing a tight margin for error with only 52 seats in the Senate, could afford to lose only one vote on the plan this week as McCain fights brain cancer in his home state of Arizona.
Tensions rose during the final vote, with protesters in the chamber's gallery chanting, "Kill the bill, don't kill us!" Multiple times during the vote, the presiding Vice President Mike Pence brought down his gavel and called for order over the sounds of protesters.
Shortly before the vote, some GOP senators spoke in the chamber while Senate Minority Leader Chuck Schumer, D-N.Y., made his closing remarks criticizing the bill as a giveaway to businesses and the wealthy. Schumer then snapped: "This is serious stuff. We believe you're messing up America. You could pay attention for a couple of minutes."
Republicans are scrambling to accomplish their key legislative goal by the end of the year and notch an achievement to promote ahead of next year's midterm elections. Democrats have seized on dismal public opinion polling on the plan and the fact that most individual tax cuts would expire under it while a corporate tax decrease would be permanent.
Speaking after the vote, Senate Majority Leader Mitch McConnell called passing the bill an "important accomplishment" that taxpayers will "value and appreciate."
"If we can't sell this to the American people we ought to go into another line of work," the Kentucky Republican told reporters.
He contended that focusing on the expiration of cuts "missed the point," adding that Democrats winning congressional majorities next year "would turn this into a very short tax bill."
Unexpected procedural snafu
The GOP still looks set to make the bill law this week despite the unexpected setback Tuesday. It came after the House passed its bill and the chamber's Republican leaders and Trump made celebratory statements about the legislation's passage.
A Senate aide confirmed to CNBC that three provisions in the bill adopted by the House on Tuesday did not comply with Byrd rule requirements. The rule governs what types of provisions the Senate may consider under the procedural budget window known as reconciliation.
One of these provisions would allow 529 college savings plans to be used for home-schooling expenses. Another is related to a tax exemption for a very narrow category of colleges. The third appears to be related to the bill's name, the "Tax Cuts and Jobs Act."
Those measures got cut from the bill the Senate approved. A motion to waive the budget rules related to the bill — which needed 60 votes in the Senate — failed shortly before the final Senate vote.
Big break for corporations
The joint legislation would chop the corporate tax rate to 21 percent from 35 percent. It would set a 20 percent business income deduction for the first $315,000 in income earned by pass-through businesses.
The personal exemption would get scrapped under the bill. The plan would raise the standard deduction to $12,000 for an individual or $24,000 for a family, just short of double its current level.
Seven individual income tax brackets would be maintained, with slight rate reductions for most income groups, including the wealthiest Americans. A larger proportion of income groups would see overall tax cuts in the early years of the plan, according to the nonpartisan congressional scorekeeper Joint Committee on Taxation.
The benefits of those and other tax breaks on the individual side would fade over time, as many cuts expire after 2025. By 2027, millions of Americans could actually see a tax increase, if Republicans do not take steps to extend the cuts.
Ryan said Tuesday after the House vote that "we have every intention of making those permanent."
On Wednesday morning, McConnell closed his remarks by saying Democrats would push to reverse the cuts and making a case for Republicans in next year's midterm elections.
Said McConnell: "Every single Democrat voted for this. They're all committed to repealing it and raising taxes on the American people. That's what's at stake in the fall of 2018."