On the Senate floor… Senate debate began late yesterday on the Tax Cuts and Jobs Act. The bill is still changing, too. Senators Marco Rubio and Mike Lee want expand the child tax credit and pay for it by cutting the corporate tax rate from 35 percent to 22 percent instead of the TCJA’s proposed 20 percent. The Senate is expected to increase the bill’s proposed deduction for pass-through business income to 20 percent instead of the bill’s original 17.4 percent. Meanwhile, Senator Ron Johnson would pay for more generous tax breaks for pass-throughs by eliminating the state and local tax deduction for C-corporations. And senators are still trying to design a “trigger” that would turn off some tax cuts if revenues and/or the economy did not grow as fast as predicted.
New JCT estimates show the Senate’s TCJA would help only some households. In 2019, 62 percent of Americans would get a tax cut of at least $100 while 38 percent would either pay about the same as under current law or pay more. By 2027, about 23 percent would pay more in taxes and only 16 percent would get a tax cut of at least $100.
Speaking of automatic spending cuts: Paygo. What happens if the TCJA passes with no further action to offset its cost? The New York Times offers a graphic illustration of where spending cuts would come from next year to comply with to the 2010 Statutory Pay As You Go law. The biggest program affected: Medicare. Unless Congress waives the law—as it has in the past.
The CBO finds little benefit from the Alexander-Murray health care bill. Passing the bill is an important ask for fence-sitting Republican Susan Collins. Backers say the measure would mitigate any negative effects of the TCJA’s repeal of the Affordable Care Act’s individual mandate. But the Congressional Budget Office says that if both laws were enacted, insurance premiums would still rise by 10 percent a year and 13 million people still would become uninsured. In effect, Alexander-Murray bill would make no difference at all if Congress repeals the individual mandate.
The Congress taketh, and the Congress giveth away. TPC’s Howard Gleckman says Congress may need to find new ways to give away tax breaks. The TCJA would make itemized deductions irrelevant for more than 90 percent of US households. But, as itemized deductions fade for most taxpayers, lawmakers will likely turn to tax credits and above-the-line deductions. Tax goodies, in other words, are here to stay.
No matter which version of the TCJA, families with young children won’t get much help. A new TPC report by Elaine Maag and Julie Isaacs shows that in the early years of the TCJA, on average, families with children receive only modest benefits from either its Senate or House version. “By 2027, families with children in the lowest two-fifths of the income distribution would owe more tax under the House version of the TCJA than under current law, and families in the middle income quintile would receive only a very small average tax cut. By 2027, all but the highest income families would owe more tax under the TCJA than under current law. Similar results characterize the Senate version of the TCJA.”
Are rules made to be broken? When it comes to changing tax laws, TPC’s Gene Steuerle says yes, unfortunately: “Accommodating the demands of lawmakers requires special interest give-backs (reversing or modifying proposed reforms) that are, in turn, paid for with badly-designed and gimmicky revenue-raisers.” He offers several examples in the TCJA. They may just reflect the cost of doing political business, Gene concludes, but often only result in worse tax law.
We’re not in Kansas anymore. Or are we? TPC’s Bill Gale takes a walk down memory lane (or a yellow brick road) toward Kansas. He rebuts Rep. Ron Estes’ recent argument that Congress should copy his home state’s tax overhaul efforts. Bill says Estes actually makes the case for why Kansas-like tax cuts are wrong for the national economy.
Chris Bergin’s wake. The public wake for the late Chris Bergin, long-time president and publisher of TaxNotes, will be held tomorrow, December 1, from 10 am to 3 pm at Murphy’s Funeral Home in Falls Church, VA. We published an incorrect date in yesterday’s edition.
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