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McConnell says Senate has the votes to pass GOP tax bill

Jeff Flake and Ron Johnson, key holdouts, confirmed their support for the massive overhaul legislation.

Sen. Ron Johnson (R., Wis), is surrounded by media as he walks from the Capitol building on Capitol Hill in Washington  on Wednesday.
Sen. Ron Johnson (R., Wis), is surrounded by media as he walks from the Capitol building on Capitol Hill in Washington on Wednesday.Read moreCarolyn Kaster / AP

WASHINGTON – Senate Republicans on Friday secured the votes they needed to pass a landmark $1.5 trillion tax package after making a few final deals Friday to get wavering senators on board.

"We have the votes" Majority Leader Mitch McConnell, R-Ky., told reporters after meeting with his caucus.

Almost simultaneously, Sen. Jeff Flake (R., Ariz.), a key holdout, announced his support for the legislation that delivers massive tax cuts to corporate America and the wealthy while bestowing mixed blessings on everybody else.

"I am pleased to announce I will vote in support of the tax reform bill," Flake said in a statement. He said he'd secured leadership support for priorities related to expensing and to a solution for immigrants brought illegally to this country as children.

Earlier Friday Sen. John Cornyn (R., Texas) had told reporters that GOP leaders had enough votes to pass the tax package, expressing optimism after a night of high-stakes negotiations. We "have at least 50, and we're still working," Cornyn said.

The tax changes still must clear several hurdles before it can become law. Once the Senate passes the bill, GOP leaders must reconcile differences between the Senate bill and a version that passed the House several weeks ago. They are optimistic they can do this, but a number of issues must be resolved, and there will be major implications for the taxes paid by families and individuals based on how those discussions go.

Securing the final few Senate votes forced GOP leaders to add more than $250 billion in tax cuts for individuals and businesses to their tax plan. To offset some of these costs, they had to abandon efforts to fully repeal the alternative minimum tax for individuals and companies, according to a brief summary of the changes that was shared with GOP members. Instead of fully repealing the AMT, they will now attempt to scale it back.

The AMT was put in place in the 1980s as a way to prevent wealthier Americans from using tax deductions to avoid paying taxes.

The comments from Cornyn, the second-ranking Republican in the Senate, came hours after Sen. Ron Johnson (R., Wis.) said he planned to back the bill. He was one of the last holdouts, though the GOP needed a little more help to ensure they had the 50 votes they needed.

The support from Johnson and Flake came after a tense standoff Thursday evening, when they joined Sen. Bob Corker (R., Tenn.) and threatened a last-minute objection to stop the tax bill from passing. This forced GOP leaders to scramble to try to accommodate some of their concerns.

Corker and Flake had pushed for the possibility of hundreds of billions of dollars in tax cuts to be scaled back as a way to minimize the tax package's impact on the government's $20 trillion debt and have called for a "trigger" to kick in and raise taxes if economic growth estimates don't pan out. It was unclear if any of those changes ended up being made to the tax package, and this trigger was not among the concessions that Flake said he had extracted from GOP leaders in exchange for his support.

As the Senate GOP meeting broke up on Friday, Sen. Ted Cruz (R., Texas) told reporters that the bill would not include those tax increases.

It's the "right thing to do," rather than "larding the bill up with additional taxes." Cruz said.

GOP leaders were also working to incorporate changes from Sen. Susan Collins (R., Maine), such as allowing Americans to deduct up to $10,000 in property taxes from federal taxable income. This change would save taxpayers $148 billion over 10 years compared with an initial version of the bill, according to the document circulated by Republican lawmakers Friday afternoon.

Cruz said that the bill would include Collins' demand on the state and local tax deductions.

On Friday afternoon Collins tweeted: "Delighted that the Senate has agreed to include my property tax deduction amendment, that will allow 166,000 Maine taxpayers who itemize to deduct a total of $725 million in property taxes each year."

Key in securing Johnson's support was a move by GOP leaders to expand tax cuts for millions of businesses, known as pass-throughs. These are companies that pass their income on to partners, owners, and investors, who in turn pay taxes on the earnings through the individual income tax portion of the tax code.

Senate GOP leaders had proposed allowing these investors to deduct 17.4 percent of their income from their taxes and then pay taxes on the remaining income. Johnson and Sen. Steve Daines (R., Mont.) argued for days that this was not generous enough for these businesses, and GOP leaders reluctantly raised the deduction level to 20 percent, which added roughly $60 billion to the size of the tax cut. But Johnson continued holding out, and on Friday GOP aides suggested the deduction had been raised to 23 percent.

On Friday, Johnson confirmed that the change to 23 percent won his support for the bill, meaning that he and Daines were able to extract $114 billion in tax cuts for these firms in just a few days.

Collins has indicated that she's moving toward supporting the bill as long as her conditions are met.

The tax cut package appeared to be sailing through the Senate until the Joint Committee on Taxation issued a report finding that even with economic growth the tax changes would add $1 trillion to the debt over 10 years. This emboldened Corker and Flake to dig in for more changes, particularly after they were told that a provision they had designed to limit the growth of the debt would not work.

Flake announced his support for the tax bill on Friday without Corker, and it remained uncertain what the Tennessee Republican planned to do.

Votes on the Senate tax package are expected later on Friday.

In addition to lowering tax rates for businesses, the Senate tax bill would temporarily cut tax rates for families and individuals until 2025.

But the bill would eliminate a number of tax benefits, including the current allowance for people to deduct state and local taxes from their federal taxable income. It would subject fewer people to the estate tax but stop short of eliminating the estate tax altogether.

The bill would also repeal the individual mandate from the Affordable Care Act, a major change that was added in recent weeks as part of a broader GOP effort to dismantle the Obama-era law. The individual mandate creates penalties for many Americans who don't have health insurance.

The House of Representatives has already passed its version of the tax bill. If the Senate passes the bill, the leaders of the two chambers will need to resolve differences between the two bills before they can send it to President Trump for his signature. House Republican leaders have signaled they would like to start this process as soon as possible to pass the bill into law.

The centerpiece of the GOP plan is a move to lower the corporate tax rate from 35 percent to 20 percent, starting in 2019. Trump has said he would not accept a corporate rate any higher than 20 percent, trying to establish a red line for negotiators.

Still more issues kept popping up. Sens. Marco Rubio (R., Fla.) and Mike Lee (R., Utah) were pushing hard for a change that would further expand the child tax credit for low-income families. To offset the cost of this expansion, they wanted to allow the corporate rate to move back up to 22 percent. Rubio and Lee had not publicly threatened to oppose the tax bill if their concerns weren't met, but they persisted in pushing for the change. GOP leaders were searching Thursday evening for a way to accept some of their child tax credit changes but offset the cost with other changes to the tax code that did not include raising the tax rate.