WASHINGTON (REUTERS) - A sweeping Republican-sponsored tax overhaul gained momentum in the US Senate on Thursday (Nov 30) with the backing of Senator John McCain, as party leaders held behind-the-scenes negotiations to try to secure enough votes for passage.
McCain, a key player in July's collapse of a Republican effort to dismantle Obamacare, said the tax Bill was "far from perfect."
But the war hero and former presidential candidate said the Bill would boost the economy and give tax relief to all Americans.
Republican Senator Susan Collins, who also played a role in the failure of the Obamacare rollback, told reporters she was still not committed to backing the tax Bill.
The Republican-controlled Senate was expected to begin a potentially chaotic "vote-a-rama" on amendments from Republicans and Democrats later on Thursday before moving to a final vote late in the evening or early on Friday.
Hours before the votes, senators were still wrestling over the Bill's contents. Several Republican withheld support while pushing for changes, including limits on how much the Bill would expand the federal deficit, inclusion of a federal deduction for up to US$10,000 (S$13,000) in state and local property taxes, and bigger tax breaks for "pass-through" companies, including small businesses.
As drafted, the Senate Bill would cut the US corporate tax rate to 20 per cent from 35 per cent after a one-year delay and reduce the tax burden on businesses and individuals, while ending many tax breaks, but would still add US$1.4 trillion to a federal debt load that already surpasses US$20 trillion.
Some Republicans want to set the reduced corporate tax rate at 22 per cent and forgo income tax cuts for the wealthiest Americans. Republican Senator Roy Blunt told reporters the 20-per-cent corporate rate "won't be raised much at all."
Another possible stumbling block was Senator Bob Corker's push for a tax snap-back provision that would raise taxes automatically, possibly on corporations, if economic growth targets are not reached in the future, to offset a higher deficit.
That snap-back proposal was under attack from conservatives and lobbyists, including interest groups aligned with billionaire industrialists Charles and David Koch, who say the prospect of tax hikes could undermine future economic growth.
But optimism over a final deal was swelling and US stocks extended gains after McCain said he would back the legislation.
Financial markets have rallied on hopes the measure will pass, a sentiment shared by conservative groups that hope to see the first major overhaul of the U.S. tax code since 1986, when Republican Ronald Reagan was president.
The benchmark Dow Jones industrial average of blue-chip US stocks was up more than 1.25 per cent at 24,240 in mid-afternoon trading on Thursday, near record levels.
"The key driver today is the tax reform. We just heard Senator McCain come out and say he will be supporting the Bill,"said Mona Mahajan, US Investment Strategist at Allianz Global Investors in New York.
"People feel like there is momentum now to get this done."
President Donald Trump and his Republican allies want to enact tax cuts before January. If the Senate and House can craft a compromise Bill that Trump will sign, it would give Republicans their first major legislative victory of 2017.
The House approved its own tax Bill on Nov 16.
Republicans fear that failure on the tax Bill could alienate donors and jeopardise their control of the Senate and House of Representatives in the November 2018 congressional elections.
Among Americans aware of the Republican tax plan, 49 per cent said they were opposed, up from 41 per cent in October, according to a Nov 23-27 Reuters/Ipsos poll released on Wednesday. The latest online poll of 1,257 adults found 29 per cent supporting the plan and 22 per cent saying they "don't know."
Democrats say the Republican tax plan is a giveaway to corporations and the wealthy. "Every time I turn around I hear about another sweetheart gift to a powerful interest,"Democratic Senator Ron Wyden told reporters.
Republicans have a 52-48 majority in the 100-member Senate, giving them enough votes for a win if they can hold together.
"We're still working on a few things," Senator Jeff Flake, one of the uncommitted Republicans, told reporters.
With Democrats united in opposition, Republicans can afford to lose support from no more than two of their own members. Vice-President Mike Pence would be able to break a 50-50 tie.
Collins, also uncommitted, said she was encouraged that Senate leaders and Trump were listening to her concerns on health care and deducting state and local taxes.
She told reporters Senate Republican leader Mitch McConnell had pledged the Bill would not result in automatic cuts to Medicare. She also said Congress will pass a continuing resolution spending Bill and that it will include two health-care provisions she wants, before a final tax Bill is passed.