The Finance Committee bill heads for the floor. President Trump will visit Capitol Hill tomorrow as the Senate begins debate on the Finance panel’s version of the Tax Cuts and Jobs Act. He’ll meet with GOP senators at their weekly policy lunch and then with the bipartisan leaders of both chambers. Senate Majority Leader Mitch McConnell wants to wrap up the tax debate this week since next week is likely to be focused on budget issues ahead of a December 8 deadline for keeping the government open. But roughly a half-dozen GOP senators have been non-committal at best about the tax plan and McConnell can afford to lose only two. The Finance bill is likely to change as the GOP tries to satisfy its holdouts.
The poor would be even worse off under the TCJA, says CBO. According to new estimates by the Congressional Budget Office, in 2019 households making less than $30,000 annually would be worse off under the Senate Finance Committee version of the TCJA than under current law. CBO’s analysis takes into account both tax changes and reductions in health care spending caused by the bill’s repeal of the individual mandate for people to have health insurance. Repeal of the mandate would result in fewer low- and moderate income people taking government subsidies to buy private insurance and lower Medicaid spending. By 2027, families making less than $75,000 would be worse off.
The stakes are high. Senator Lindsey Graham told CNN’s State of the Union yesterday that "To every Republican senator, the fate of the party is in our hands as well as that of the economy. The economy needs a tax cut and the Republican party needs to deliver, so I think we'll get there."
Is heightened attention over sexual harassment taking attention from the TCJA? House Democratic leader Nancy Pelosi thinks so. She went on yesterday’s Meet the Press hoping to take at least a few potshots at the GOP tax bill, But after a long segment where moderator Chuck Todd inquired only about sexual harassment in Congress, an incredulous Pelosi asked, “You mean we're not even going to talk about taxes?” Nonetheless, she squeezed in a few talking points, calling the bill a “job killer” that is “going to raise taxes on the middle class.”
The Senate’s version would trim taxes at first, but raise them for half of households in ten years. TPC’s Howard Gleckman highlights key findings from TPC’s analysis of the TCJA. It would “cut taxes by an average of $1,300 in 2019, according to [TPC]. But by 2027, after nearly all of the individual tax changes in the panel’s bill are scheduled to expire, the average tax cut would fall to just $340, and half of households would pay more than if Congress had never changed the law at all.
As for the House version of the TCJA, the public is skeptical, as are key stakeholders, but Congress will forge ahead. Says Speaker Paul Ryan, “when we do this — make good on our word, make good on our promise, make people’s lives better — we’re going to be just fine politically.”
But that House bill would boost the economy only modestly. Gleckman also outlines the new TPC dynamic analysis of the House bill. “The tax cut would increase economic output by 0.6 percent in 2018. However, this effect would shrink over time and the bill would boost the level of output by 0.3 percent by 2027 and by only by 0.2 percent in 2037. This is far less growth than the President has promised.
What will become of infrastructure investment? The House TCJA would nix the deduction on tax-exempt private activity bonds. Public-private partnerships use that financing tool to help build roads, highways, housing, hospitals, airports and other critical projects. The deduction costs nearly $40 billion over a decade, but without it, private sector investment in infrastructure projects—once a goal of the Trump Administration--could slow.
How should policymakers determine who benefits from tax changes? TPC’s Bill Gale considers the measures analysts and policymakers use. He warns that using the percentage change in taxes paid, or changes in the share of taxes paid by an income group, can be misleading. Instead, Gale argues that “the soundest approach is to examine how a change in tax policy affects a household’s after-tax income. This shows the proportionate change in each household’s standard of living,”
Like tax cuts enough to lose some Social Security and Medicare benefits? The Urban Institute’s Melissa Favreault urges Americans to pay attention to the House and Senate tax bills. “Citizens should ask themselves whether the business and personal income tax cuts in the House and Senate versions of the TCJA are worth increasing the risk of steep Social Security and Medicare reductions in the future.”
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