Senator John Thune joined me to discuss the closing negotiations regarding the tax bill:
HH: Joined now by United States Senator John Thune. Congratulations, Senator Thune, I think you’re very close to a breakthrough tax bill. Do you think it gets done today and voted on next week?
JT: Well, thanks, Hugh, I hope that’s the case. We have, you know, we had to get the scoring, and so we’re meeting here in a few minutes to hear from, kind of what the JCT, Joint Committee on Taxation numbers look like, and then I think we have a final meeting with the House. But I think we’re very close, and the outlines of the bill, you’ve seen. And I, you know, it’s, you always like to, with pride of authorship, think yours is the best product, but when you merge the two together, I think we’ve got something that’s really good for middle income families, and really good for growth in the economy.
HH: Now the best must not be the enemy of the good. And so I’m going to applaud and cheer this bill. But I’m going to take my five minutes with you to lobby you on two areas where I think you’ve made a mistake.
HH: Interest in corporate debt…
HH: The deductibility, I think it’s going to crush some businesses that borrowed heavily to expand. Has any change been made to this?
JT: Well, the, basically, the formula that’s allowed on interest deductibility on the business side, we kind of, again, we came, merged the House and the Senate versions. We used a factor that’s based upon EBIT. Theirs uses EBITDA, and what it will be is four years of one to a transition to the new system. There is a provision in there that allows smaller businesses to continue to deduct interest up to a certain, you know, gross receipts threshold. So we’re trying to make sure that small businesses have that incentive, and that the larger ones, if they have made big investments, that they are able to take advantage of those, and as they transition to a new system.
HH: Well, if the score gives you any maneuverability, that’s where I’d go to first.
HH: I really would. And number two, pass-throughs for professionals, and I must tell you, Senator Thune, back before I joined NBC, I could do fundraisers. I did some with you. I’ve been to a number of events. You know, the heart and soul of the not just donor class, but the working party people are lawyers, doctors and accountants. And boy, are my phones burning up from high tax states with professionals who hate this bill, because they’re going to face a big tax hike. What’s your response?
JT: Well, one, I think there are, yeah, there are some professional services that don’t get the preferential pass-through treatment. But the rate structure will lower their rates. I mean, they’re going to go down, and particularly if they’re on the high end, they lose the Pease adjustment, which is 1.35. They go from 39.6 down to 37. And if you look at the benefit they get from throughout up the rate structure, you know, they benefit from that as well. And there is a carve-out, although granted there are going to be a lot of people who won’t qualify for it, for up to about $300,000 dollars of taxable income that they would be eligible for the pass-through treatment. So we tried to deal with small businesses, and that last carve-out, by the way, I would say, is applicable to professional services as well as, you know…
HH: So my advice to you would be to raise that carve-out higher so that, look, the alternative minimum tax, I hate it being there, because it just takes away our simplification. But it only applies to people who make a million bucks or more a year, so I’m not going to cry crocodile tears for them.
HH: But doesn’t it, if you can get it up higher, if that, if you’ve got, again, margin, are you going to use the whole $1.5 trillion dollar margin that you’ve got to work with within the Byrd rule?
JT: I think we end up doing that. You know, we’re trying to, again, make sure that in terms of distribution tables who you know, bears the tax burden after this is done, that it falls fairly closely to what it is today. We’re trying to do this as, you know, in a way that reflects the progressivity in the code today. We did have in the Senate bill up to a half a million dollars that was eligible for pass-through treatment for professional services. It got modified in the Senate-House conference. But I hear what you’re saying. I mean, I think that’s a very real issue, and we are trying as best we could within the constraints we had to work with to try and provide some relief for people who are, as you said, work very, very hard in the professional services industries.
HH: If you have margin, go back to the half million.
HH: I mean, just sit there and tell Pete Roskam, he heard me this morning. So look him in the eye and say Pete, you heard Hewitt tell you go back to the Senate bill. Last thing, the tuition waivers for kids, I’ve had some heartbreaking emails from low income people whose kids work at colleges. They got this tuition waiver. They can’t afford to keep their kids in college if the tuition gets counted as income. Are there transition rules for these people?
JT: There are, and we treated that differently in the Senate than they did in the House. And I think in the combined version, I think that’ll be, hopefully, people will be happy with how we end up, or at least not as upset about how we end up there. I agree. I think it’s important for people to be able to help educate their kids.
HH: Okay, last thing, do we get this done next week, John Thune? Percentage of confidence that the President signs a bill next week from Senator John Thune?
JT: Well, being Scandinavian, Hugh, I’m never 100% on anything. So I think, yeah, I think we’ve got, we’re 90% of the way there.
HH: All right.
JT: And if we get it finalized and the printout this weekend, I think we vote on Monday and Tuesday in the Senate.
HH: All right. Now completely switching subjects, everyone’s worried about losing the Senate. We have a minute. I think if you nominate Josh Hawley in Missouri and Martha McSally in Arizona, and Tim Pawlenty comes back in Minnesota, you guys can pick up seats. What do you think, John Thune?
JT: I think we can. I think it all comes down to the right candidates. And as we found out in Alabama, you can’t, candidates who are unelectable don’t normally get elected.
HH: (laughing) Well and truly put.
HH: That’s very Scandinavian, too.
HH: We’ll leave it on that. Senator John Thune, have a Merry Christmas. Thanks for joining me this morning.
JT: Same to you.
End of interview.