Donald Trump is poised for the first major legislative win of his presidency, with Congress approving the biggest US tax overhaul in 30 years.
Why Europe is worried about Donald Trump’s tax bill
Under attack at home for his alleged links to Russia and increasingly isolated abroad, Trump has had a difficult first year as president. The Tax Cuts and Jobs Act will be a rare victory for the Republican party which controls not just the White House, but also the House of Representatives and the Senate.
But the bill, which has been rushed through Congress in a cloud of secrecy, has been widely attacked as benefiting corporations and the very wealthy, despite claims it would help the middle class.
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It cuts the corporate tax rate from 35% to 21% while providing sweeping tax deductions for special interests and lowering the top federal tax rate from 39.6% to 37%. The business tax cuts will be permanent, but much-touted deductions for individuals, seen as crucial to winning over swing Republicans, will expire after eight years.
The agreement also attempts to dismantle part of Barack Obama’s signature health legislation, the Affordable Care Act, often referred to as Obamacare, which will be “a major step toward the ultimate GOP goal of unravelling the law”, says Fox News.
Republicans insist that “the sweeping package of tax cuts for corporations, small businesses and individuals will boost economic and job growth”, says Reuters. “They also see the measure as key to having any hope of retaining their majorities in the House and Senate when voters go to the polls next November,” the news agency adds.
The latest poll from CNN will make worrying reading for Republicans: it shows there is a growing perception among American voters that the reforms favour the wealthy over the middle class.
Opposition to the bill has grown 10 points since early November, and 55% now oppose it, compared to just 33% who support it.
More than two thirds see the bill as benefiting primarily the wealthy, with almost four in 10 (37%) saying that, if it becomes law, their own family will be worse off. More than six in 10 (63%) see the tax bill as leaving the President and his family better off – especially after well-publicised giveaways for property developers.
CNN says that “beyond differing legislative priorities, partisan perceptions of the tax bill itself are night-and-day”. Unsurprisingly this divide extends to the media as well.
John Cassidy in the New Yorker describes the final bill as a “corrupt, budget-busting hairball” that fails to deliver on any of the Republican promises to make the US tax system revenue neutral, simple and fair.
He also says that, by adding an extra $1.5bn (£1.12tn) over the next decade through its complex web of massive tax giveaways to corporations and the wealthy, the bill will not only deepen the income gap between rich and poor but go against the very idea of fiscal prudence and responsibility on which the Republican party is founded.
Meanwhile Justin Lahart writing in The Wall Street Journal said while there were several surprises for investors in the Republican bill, “the most significant is that they add up to a bigger boost to economic growth next year”, with both sales and profits likely to be stronger than most expect.
Analysing the effects of the bill, the Financial Times calculated “companies with relatively high tax rates and mainly US-based revenues, which are not hit by the new charge on overseas assets, will gain the most from the new code”. Among those expected to be the biggest beneficiaries are oil refiners, railroads, airlines and banks.
As shown by recent research by the International Monetary Fund, “the problem with US taxes is not that income taxes are too high on the rich but that that they are too low”, says Quartz. “The Republican tax plan will exacerbate this problem, rather than fix it,” warns the magazine.
