TPC updated its distributional analysis of the House bill. It finds the bill looks very much like Chairman Kevin Brady’s original version. TPC’s Howard Gleckman says high-income households would do even better than under the original version, especially by 2027. The top 1 percent would see an average tax cut of about $62,000 or 2 percent of their after-tax income. Middle-income households would get an average tax cut of $360 or 0.5 percent of their after-tax income.
There remain political costs… The House will likely pass its version of the TCJA this week but the GOP leadership must still convince rank and file members that its overall benefit will be greater than the political costs of some of its provisions, like repealing the state and local tax deduction.
The Senate Finance Committee began its mark up of the Tax Cuts and Jobs Act yesterday. Committee members reserved 355 amendments for the panel to consider, though many will likely never get a vote. Chairman Orrin Hatch signaled that he’ll offer two biggies: One to raise enough revenue so the measure does not violate the Senate’s Byrd rule that bars budget bills from adding to the deficit after 10 years. The other would end the double taxation of corporate dividends, an idea Hatch has been advocating for years. He may release an amended version of the bill as soon as today. Senate Majority Leader Mitch McConnell hopes to have a full Senate vote on the bill the week after Thanksgiving.
Another hot-button amendment. Hatch also said he may offer an amendment to allow tax deductions for part of the cost of contributions to religious schools to subsidize tuition. The proposal is strongly supported by social conservatives but will enrage most Democrats, especially since the panel would also eliminate the deduction for taxes paid to fund public schools.
About that Byrd rule. When the Senate last faced this problem—in 2001—it solved it by allowing the tax cuts to expire after a decade, which eventually took the government to the brink of the fiscal cliff. That could happen again. Marc Goldwein of the Committee for a Responsible Federal Budget told The Wall Street Journal: “There’s no real legitimate policy around having that much of the bill expire. You would just be gambling… that some future Congress will want to continue it.”
Does a tweet count as an amendment? Well, no, but President Trump, or at least an aide using his Twitter account, offered two cents on the tax bills in Congress yesterday, asking GOP colleagues to end the Affordable Care Act’s individual mandate and use the extra revenue to cut the top individual income tax rate to 35 percent with “all of the rest going to middle income cuts.” Will they listen? If a tweet falls in the forest…
And two-fifths… The Wall Street Journal reports (paywall) that the Joint Committee on Taxation estimates that under the Finance Committee’s version of the TCJA, 40 percent of taxpayers in 2019 would see their taxes either go up by $100 or more (9.1 percent), or change by less than $100 (31.1 percent).
Rich taxpayers raise two kinds of fuss. The Finance Committee bill would tax stock options as soon as employees receive the right to them—meaning before they “vest” and can be sold. Venture capitalists worry this will hurt their ability to recruit talent. Meanwhile, a group of 400 US millionaires have sent a letter to Republicans in Congress urging them to not cut their taxes. They say it would be a mistake to reduce taxes on the richest families when both national debt and income inequality are high.
Why are they doing this again? History shows that tax cuts don’t make a president popular. Tax historian Joe Thorndike tells USATODAY that “Republicans are counting on the political benefits” of tax cuts, but “the abundant historical evidence is it won’t work.” Duke University tax professor Larry Zelenak suggests, “They don’t need to pass a tax bill to keep in good standing with their voters,” he said. “They need a tax cut to keep in good standing with their donors.”
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