GOP tax bill nears the finish line
Republican leaders in the House and Senate struck a tentative deal on a final tax bill this week, putting the most significant tax overhaul in more than 30 years on track to be signed by President Trump before Christmas. The agreement slashes the corporate tax rate from 35 percent to 21 percent and makes it effective in 2018. It also lowers the top individual income tax rate from 39.6 percent to 37 percent, a move meant to soothe high-earning taxpayers in blue states who face the loss of deductions for state and local taxes. The Senate bill capped or eliminated such deductions, but taxpayers will now be allowed to deduct up to $10,000 in state income or property taxes.
It remains to be seen whether the handful of Republican swing votes in the Senate will embrace the final bill. Sen. Susan Collins of Maine voted for the initial Senate bill in exchange for promises to stabilize the health-care insurance exchanges and add protections for Medicare—changes that House leaders don’t support. She has also opposed lowering the top individual income tax rate. Republicans can afford to lose only one more vote if Collins rejects the bill along with Sen. Bob Corker, provided the Senate votes before Democrat Doug Jones of Alabama is seated.
What the columnists said
“What Congress is prepared to pass is not tax reform,” said Jonathan Chait in NYMag.com. “It is tax un-reform.” The slapdash legislation is shot through with loopholes, giveaways, and glitches that will overwhelmingly benefit wealthy taxpayers with skilled accountants. The pass-through loophole, for example, will allow highly paid professionals to pay 20 percent—nearly half of what they would owe as individuals—by declaring themselves to be businesses. In many ways, “a badly botched tax bill helps conservatives,” said David Dayen in NewRepublic.com. The more money the federal government loses to tax avoidance, the less there is to spend on social programs. “That’s the real game here.”
“There are plenty of understandable objections to the tax bill sailing through Congress,” said Tony Mecia in WeeklyStandard.com. You can make a case that it’s being rushed, or that it will add $1.5 trillion to the deficit. But what it doesn’t do is punish the poor and middle class to benefit the wealthy. The bill cuts taxes for “the majority of Americans at every income level,” according to Congress’ Joint Committee on Taxation, with 62 percent of taxpayers seeing a tax cut of $100 or more in 2019 under the Senate version. That isn’t likely to change much under the final agreement.
Still, this tax plan is wildly unpopular, with just 35 percent of Americans’ support, said Jonah Goldberg in NationalReview.com. Republicans are hoping that the middle-class tax cuts, “combined with an expected boost in economic growth,” will give them a political windfall in the years to come. Democrats tried a similar strategy with Obamacare, which also passed along party lines “in the face of public opposition.” Their gamble failed spectacularly, with furious voters handing control of Congress to Republicans and sweeping Donald Trump into office. “Will the tax reform effort be the GOP’s version of Obamacare?” Only time will tell.