(Adds Pelosi, Johnson, Lance, Ryan, White House, links to graphics, market impact, analyst comment)
By David Morgan and Amanda Becker
WASHINGTON, Dec 19 (Reuters) - Congressional Republicans hit a last-minute snag on Tuesday in their drive to pass the biggest U.S. tax overhaul in 30 years, requiring them to hold another vote on Wednesday and delaying what was still likely to be their first major legislative win under President Donald Trump.
The Republican-controlled House of Representatives passed the tax package on Tuesday afternoon and sent it to the Republican-led Senate. But a staff official there ruled that three provisions of the House bill did not comply with the Senate’s complex rules, said Independent Senator Bernie Sanders.
As of early evening, the plan was for the Senate to delete the three offending provisions and vote on the bill. If approved, as widely expected, the altered bill would be sent back to the House for another vote on Wednesday. Final approval there would send the bill to Trump to sign into law.
Democrats seized on the embarrassing stumble as evidence of the Republicans’ rushed, secretive development of the bill.
“The House revote is the latest evidence of just how shoddily written the GOP tax scam really is,” House Democratic leader Nancy Pelosi said in a statement.
The problematic provisions deal with using educational savings accounts for home schooling and with private university endowments. The Senate parliamentarian disqualified them on procedural grounds, throwing a wrench into what would have been a day of celebration for Republicans and for Trump.
“Listen, people screw up. A member of the staff screwed up. It’s not the end of Western civilization. We have the votes today; we’ll have them tomorrow,” Republican Senator John Kennedy told MSNBC on Tuesday evening.
White House legislative affairs director Marc Short, commenting on the need for a House revote, said: “I don’t think it’s that uncommon for a big piece of legislation like this.”
The bill’s major components include steep tax cuts for corporations and wealthy taxpayers, a revamp of how the United States taxes multinational companies, and a new tax deduction for the owners of “pass-through” businesses, ranging from mom-and-pop stores to large real estate and financial enterprises.
It offers temporary tax rate cuts for some individuals and families, while reducing sharply the number of Americans who itemize deductions on their tax returns and cutting back the number and scope of available deductions.
In its first vote, the House passed the bill by 227-203, overcoming united opposition from Democrats, who blasted the bill as a giveaway to corporations and the wealthy.
Republicans insist the package will boost the economy and job growth. They see the measure as crucial to defending their majorities in the House and Senate in congressional elections coming in November 2018.
But 12 Republicans voted against it, including 11 from New York, California and New Jersey, all high-tax states where affluent homeowners could be hurt by the bill’s new limits on deducting state and local taxes.
“I voted against the tax bill today because it significantly reduces the ability of New Jerseyans to deduct state and local taxes,” Republican Representative Leonard Lance said in a statement, adding he also had concerns about its impact on the federal deficit and the mounting, $20 trillion national debt.
In a shift for a party once dominated by fiscal hawks, just one House Republican - Walter Jones of North Carolina - voted against the bill solely because it would expand the deficit and add an estimated $1.5 trillion to the debt over 10 years.
The bill repeals part of the Obamacare health system and allows oil drilling in Alaska’s Arctic National Wildlife Refuge, just two of many items added to the bill to secure votes of support as it rocketed through Congress in mere weeks.
The last time Congress overhauled the tax code was in 1986 under former Republican President Ronald Reagan, a process that took years. The Reagan tax reform was a bipartisan effort drafted after dozens of public hearings and months of open debate.
The latest package was written behind closed doors by six Republican Trump administration and congressional leaders, with little input from the party’s ranks and none from Democrats.
Middle-income households would see an average tax cut of $900 next year under the bill, while the wealthiest 1 percent of Americans would see an average cut of $51,000, according to the Tax Policy Center, a nonpartisan think tank in Washington.
In remarks on the House floor where he was twice interrupted by protesters in the audience, including a woman who shouted: “You’re lying!”, House Speaker Paul Ryan said: “Today, we give the people of this country their money back.”
He said in a statement: “On January 1, Americans are going to wake up with a new tax code. In February, they’re going to see withholdings go down so they see bigger paychecks. And April 15 will be the last day they have to comply with the old, bad system. This is a good day for America.”
The bill’s passage had little evident impact on stock markets, which have rallied for months on the prospect of tax cuts for corporations. The benchmark Dow Jones industrial average closed down less than 1 percent at 24,792.
“The market had been pretty well expecting this,” said Chuck Carlson, head of Horizon Investment Services in Hammond, Indiana.
The end-of-year sprint toward passage by Congress marked a remarkable recovery of Republican fortunes since mid-2017, when the party’s drive to dismantle former Democratic President Barack Obama’s signature healthcare law crumbled in the Senate and prospects for a tax overhaul seemed doomed by party infighting.
Short, the White House official, told reporters that Trump was excited about the progress of the tax bill, “but I think that the healthcare vote still hangs over us a little bit. So there’s a little bit of a cautious excitement.”
Additional reporting by Susan Cornwell and Katanga Johnson; Writing by Andy Sullivan; Editing by Kevin Drawbaugh and Peter Cooney