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The Perfect vs. The Passable

Sen. Ron Johnson speaking at a lectern, with an American flag
Sen. Ron Johnson, R-Wis. Photo courtesy Wisconsin Technical Colleges on Flickr.

Congressional Republicans have pinned their hopes on passing tax reform before the end of the year. The House of Representative passed their version of the bill last week, and the Senate is expected to consider their version after Thanksgiving.

But Republican leaders face an unexpected roadblock in the form of Sen. Ron Johnson, R-Wis., who publicly said that he would not vote for the Senate tax reform package in its current form.

Unlike some of his Senate colleagues, Johnson is not a RINO (Republican in Name Only). A lot of his specific criticisms of the Senate tax bill have merit from a Republican perspective. Johnson has suggested that the Senate plan favors corporations over pass-through entities, such as partnerships and limited liability companies; in the past, Johnson suggested treating corporations like pass-through businesses, eliminating double taxation on the former and leveling the playing field for the latter.

For now, Johnson says he has given up on advancing his proposal, according to The Wall Street Journal. But he maintains that he still won’t vote for the Senate bill as it stands.

However much merit his objections have, the truth is that the nature of Johnson’s objections is not really the point.

In our work as financial advisers, when my colleagues and I think clients should consider selling a security, we often tell them that holding on to what they have is the same as going out and buying it that day. Given the Republicans’ very narrow majority – if you want to call it that – in the Senate, opposing the GOP tax plan this year is tantamount to saying you prefer the status quo.

In other words, it is tantamount to saying you prefer the status quo that gives America the highest corporate tax rate in the developed world, with the consequence that well over $2 trillion held by American businesses is effectively trapped overseas. It is tantamount to saying you prefer today’s higher tax rates and loophole-ridden tax code to the somewhat lower rates and modestly broadened base of the House and Senate proposals. Specifically in the Senate bill’s case, it is tantamount to saying you prefer the Affordable Care Act’s individual mandate to the bill that would remove it.

I doubt that these are Johnson’s actual positions. But he got himself tangled up in his concerns about whether noncorporate businesses are doing as well as larger corporations in the proposed legislation, and lost sight of the bigger picture.

Then there is the matter of his bruised ego. Johnson feels his concerns were not fully addressed earlier in the process, and that the process itself was rushed and opaque. President Trump helpfully offered to apply some balm to the ego bruise by making sure Johnson got the information he wants and that his proposals were at least considered. Trump reportedly called Johnson to say he would “work [his] tail off” to win Johnson’s vote. Whether either of the things the president promised actually happen is outside Trump’s control, of course, but this is the sort of presidential sweet talk that can induce a legislator to embrace a bill he should naturally be inclined to support in the first place.

Assuming that Democrats hold the line, Senate Republicans can only afford to lose two votes and still pass their tax reform plan. While Johnson was the first Republican to definitively and publicly say he would not vote for the bill, other Republican senators’ votes can safely be considered, at best, in play. Regaining Johnson’s support is a practical necessity as much as a potential symbolic victory.

Winning over Johnson may still not be enough to get a tax bill through the Senate. For that, we will have to see in which direction the RINOs charge. But with a bit of effort, Republican leaders should at least be able to get Johnson to travel with the bulk of the herd.

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