Fear: Trump in the White House(97)

On the Senate side, Finance Committee chair Orrin Hatch put together a group made up of Senators Pat Toomey of Pennsylvania, Rob Portman of Ohio, Tim Scott of South Carolina and John Thune of South Dakota to handle the negotiations on his behalf, since he had a relatively limited knowledge of tax policy. Cohn was on the phone nonstop with these senators.



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Cohn discovered how challenging tax reform could be. One of his charts was titled, “The Federal Income Tax System Is Very Progressive.” He believed it was another important chart; it showed the big picture, told the whole story. Forty-four percent of Americans did not pay federal income tax.

During the 2012 presidential campaign, when the percentage was higher immediately following the Great Recession, Republican nominee Mitt Romney was recorded saying disparagingly, “There are 47 percent who are with [President Barack Obama], who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it—that that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what. . . . These are people who pay no income tax. . . . My job is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives.”

While most of the 44 percent paid payroll taxes on their wages that went toward Social Security and Medicare, as well as state, local, property and sales taxes, they paid zero dollars in federal income tax. That meant the federal government brought in revenue for its budget from only 56 percent.

Many low-income people paid less than zero, Cohn’s slide showed. Their income was so low that not only did they owe the government no federal income tax, they cost the federal government revenue because it gave them refundable tax credits—money from the government—like the Earned Income Tax Credit and the Child Tax Credit.

Ivanka Trump worked with Senators Marco Rubio and Mike Lee to increase the Child Tax Credit from up to $1,000 per child to $2,000. Rubio and Lee would not vote for the final tax package unless this was included. “We had to buy their votes,“ Cohn said. “We’d been extorted by Lee and Rubio.” He believed the federal government had conflated taxes and welfare, and, of course, was using tax legislation to help the poor.



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The corporate tax rate was still a key question. Trump was stuck on 15 percent. Cohn and Mnuchin finally got him to agree to 18 percent. Then Speaker Ryan, the tax expert, called and urged Trump to move to 20 percent. Orrin Hatch’s group of senators and Cohn came up with a rate of 21 percent.

Cohn called Trump. He gave the president a complicated technical description of the advantages of this corporate tax rate. A tax lawyer might understand the nuances of the various percentages or of certain loopholes Trump could not possibly understand or care about.

“Go for it,” Trump said.

Cohn saw that he could do anything on the tax reform bill as long as Trump could call it a win.



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Trump had a marketing idea: “Call it the ‘Cut, Cut, Cut Bill.’?” He loved the idea, and had a long phone call with Ryan and Brady to sell this name. After the phone call, Trump was under the impression that it would be called the “Cut, Cut, Cut Bill” in the House.

The House called it “The Tax Cut and Jobs Act.” But because of ancient Senate rules, that title was too short, and rather unbelievably it was finalized as “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018.”

Cohn found out that getting votes in the Senate was all about giving individual senators their favorite loopholes or tax breaks. “It’s a candy store,” he said. Senators Chuck Grassley, John Thune and Dean Heller were among those who wanted credits for alternative fuel, including windmills. Susan Collins insisted on a deduction for schoolteachers who bought supplies for their classrooms. She would not vote for the bill if the deduction was not included. Ron Johnson of Wisconsin was concerned about pass-through businesses. McConnell made other promises including one to Jeff Flake on immigration.

The final bill was a dizzying labyrinth of numbers, rules and categories. There was no doubt that it was a Republican tax bill, benefiting corporations and the wealthy most. The bill, however, would reduce taxes for all income groups in 2018, and according to the Tax Policy Center, after-tax income would go up an average of 2.2 percent.

Most in the middle class—Americans earning taxable income ranging from $19,000 to $77,000—would go from the 15 percent tax bracket to the new lower 12 percent tax bracket, saving the average person hundreds of dollars. These individual tax cuts, however, would decrease each year and end altogether in 2025.

The business benefits included the reduction in the corporate tax rate from 35 to 21 percent. Another was that so-called pass-through enterprises such as partnerships and small businesses like the Trump Organization could get an effective 20 percent tax deduction.

Around 1 a.m. on December 20, 2017, Vice President Pence was in the chair if they needed his vote to break a tie in the Senate.

It passed, 51 to 48.

A senior Democratic senator with whom Cohn was good friends came up to him. He seemed to be the most agitated person walking off the Senate floor.