The House bill does not try to meet the reconciliation requirements. This was widely publicized when they passed it. While they did not say so, part of the reason for it seems to have been that they weren't sure that the Senate would pass it.
The problem is that they only want to support the bad things (higher taxes, etc.) if they will get the good things. E.g. increasing the child tax credit is a good thing. Eliminating the mortgage interest deduction is a bad thing.
A real tax reform is going to have winners and losers. They will have to take stands on increasing some taxes to make cuts elsewhere. The truth is that they don't have enough things that raise revenue in the bill because they wanted to write it as a tax cut for everyone. And the basic promises are unfunded. The corporate tax rate was promised to drop to 20%. The original idea was to eliminate deductions to drop the rate from 35%. The effective rate now is 27.1%.
It would be easier to reduce the corporate rate to 28%. That would leave room for some small deductions. Paul Ryan had a proposal to create more revenue, called the border adjustment tax, but President Donald Trump and others didn't like it. Without that, they have to fund the tax cut with debt. And they don't really have much in the way of money that they can use for individual tax cuts, which are the ones that are actually popular.
Whatever they might do to fix the problem of the long term financing will be unpopular. They could make the more popular tax cuts temporary while making the less popular ones and the revenue raisers permanent. That would put them in a situation where they could renew the popular tax cuts in a decade. Of course, the optics are then bad, as they would be making the popular tax cuts temporary.
The House does not want to make hard choices like that and then have the Senate make different compromises. Because then they are stuck with the worst of both worlds. They agreed to something people didn't like and they don't get the benefit from it.
Meanwhile, the Senate doesn't want to make the hard choices yet either. They'd rather put them off to the reconciliation bill. That way, they can at least agree on what bad stuff they need.
Republicans also have less room to maneuver in the Senate. They can't lose more than two Republican Senators without replacing them. So ultimately, the Senate has more leverage.
Another issue is that they may want to bring back things previously rejected. For example, border adjustment is consistent with the territorial tax changes that they want to make and produces a large amount of revenue. It may be complicated and confusing, but optically that's good for a tax reform. It makes it harder to demonize. They may feel that it will be easier to negotiate when people have to choose between lowering the corporate tax or avoiding border adjustment.
By putting out a plan, they can make people work from that plan rather than saying vague things like we'll pay for rate reductions by eliminating tax loopholes. Those kind of things sound great until people discover that they are using the "loophole" that is being eliminated.
It's also worth noting that an option is for the Senate to eliminate what little remains of the filibuster. If they did that, then they could avoid reconciliation rules entirely. And that's completely out of the House's control. It's a Senate rule. They'd have to change it. They don't need the House to do anything. Which also may ease negotiations, as there are some Senators who don't want to eliminate the rest of the filibuster. So they may agree to provisions that they otherwise wouldn't in order to keep the filibuster.
State and Local Tax deduction
The State And Local Tax (SALT) deduction elimination is actually popular among a certain brand of Republican. It has several advantages.
- The tax break advantages rich people more than middle class people (like all itemized deductions, it is useless to poor people who have no income from which to deduct). This helps offset the perception that the Republican bill favors the rich over the middle class.
- The tax break advantages people in high tax states more than people in lower tax states. High tax states tend to be won by Democrats. Low tax states tend to be won by Republicans.
The greatest downside is that it hits Republican voters in Democratic states. Those people donate even if they don't change election results with their voting. And those voters may still like the overall bill even if they dislike that provision.
By forcing party unity now, it will be easier to enforce it later. Because the SALT deduction is actually something that the Senate will find easier to pass than the House. This is because the states where SALT is most used tend to have Democratic Senators: California; New York; Massachusetts; etc. Those states still have Republican members of Congress. But in the Senate, they are overwhelmingly Democrat. So that's a provision that has a good chance of sticking, as they don't have to worry much about losing it in the Senate.
SALT deduction elimination may get votes from some Democratic Senators in states that Trump won. Because there are several Democratic Senators from states where SALT deductibility is not a big issue. Think West Virginia, North Dakota, Montana, Missouri, and Indiana. Those Senators are up for election in 2018 and may be looking to buttress their bipartisan credentials.