Hill Republicans may reveal the final Tax Cuts and Jobs Act today. After backroom bargaining, GOP leaders are still working out last-minute issues. The bill may include an option to deduct up to $10,000 in state income or sales taxes and property taxes. Lawmakers are “looking at” making individual income tax cuts expire in 2024 instead of 2025 to free up $170 billion in revenue for other tax reductions. GOP tax writers are still trying to identify ways to “fund $2 trillion in tax reform into a $1.5 trillion box,” as Senator Ron Johnson explained. It’s safe to say the final provisions won’t fit on a post card. And House Speaker Paul Ryan says he’s unconcerned about the plan’s lack of public support: “Results are going to be what sells this bill, not the confusion before it passes.”
There will be a vote on the TCJA next week, if everybody’s there. The drama will be in the Senate. John McCain and Thad Cochran missed votes this week due to ill health. Since Bob Corker will oppose the bill, the Senate GOP needs the support of McCain and Cochran to assure passage, with a tie-breaking vote by Vice President Pence. He’s delaying a trip to Israel in case he’s needed. Marco Rubio says he’s withholding support unless the final bill further expands the child tax credit. And Mike Lee and Susan Collins are undecided. Buckle up….
Comparing dynamic estimates: Be careful. TPC’s Ben Page explains how different ways of measuring the macroeconomic effects of tax policy may tell very different stories. Analysis might show year-by-year changes to the level of economic output, changes to the average level of economic output over a period of time; or changes to the average growth rate. The first two presentations differ only in their detail. But the third cumulates over time. That means a given increase in the growth rate implies a much higher trajectory for future GDP than the same percentage change in the level of output.
The corporate alternative minimum tax would affect different industries… differently. TPC’s Chenxi Lu and Joe Rosenberg explain. Both the House and Senate versions of the TCJA would lower the corporate rate to 20 percent. The Senate bill would retain the corporate AMT, making it the de facto tax for many corporations. The distribution of minimum corporate tax payments would be quite different from current law, which currently skews toward insurance, finance, and mining industries.
Meanwhile, in Scotland. The Scottish government announced tax changes yesterday. Higher earners will pay more than those elsewhere in the United Kingdom, and lower earners will pay less. There will be a new tax bracket of 21 percent for those earning more than £24,000. The top tax rate will climb from 45 to 46 percent. Nobody earning less than £33,000 will pay more tax they do now.
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