House Republicans Unveil Tax Reform Bill
House Republicans unveiled their tax reform bill today, but its fate is far from clear.
After a one-day delay due to last-minute objections to the details, House Republicans announced their tax plan today, but it’s fate remains unclear:
WASHINGTON — Republican lawmakers unveiled the most sweeping rewrite of the tax code in decades on Thursday, outlining a $1.51 trillion plan to cut taxes for corporations, reduce them for some middle-class families and tilt the United States closer, but not entirely, toward the kind of tax system long championed by businesses.
The House plan, released after weeks of internal debate, conflict and delay, is far from final and will ignite a legislative and lobbying fight as Democrats, business groups and other special interests tear into the text ahead of a Republican sprint to get the legislation passed and to President Trump’s desk by Christmas.
“With this plan, we are making pro growth reforms, so that yes, American can compete with the rest of the world,” said House Speaker Paul D. Ryan of Wisconsin.
Representative Kevin Brady, chairman of the House Ways and Means Committee, said that the plan had the “full support” of President Trump and predicted that it would be on his desk this year.
The bill is estimated to cost $1.51 trillion over a decade. Lawmakers must keep the cost of the bill to $1.5 trillion if they want to pass it along party lines and avoid a fillibuster by Democrats. Lawmakers have been scrambling for days to find a way to make cuts that are expected to cost trillions of dollars into a $1.5 trillion hole. That has prompted a host of changes on the corporate and individual side, including a new twist that would limit the mortgage interest deduction by capping it at $500,000.
Anticipating the coming resistance from industry groups, Mr. Brady said: “We’re going to prove them wrong once and for all.”
“This isn’t the last product,” said Representative Carlos Curbelo, Republican of Florida and a member of the House Ways and Means Committee. “This is just the kickoff to this tax reform exercise.”
As for the details, the plan will impact both personal and corporate taxes:
The plan establishes three tax brackets, 12, 25 and 35 percent, and also keeps a top rate of 39.6 percent for the highest-earners, collapsing the total number of brackets from seven. The brackets fall along the following lines:
Those making up to $24,000 will pay no income tax. For married taxpayers filing jointly, those earning up to $90,000 will be in the 12 percent bracket; those earning up to $260,000 will in the 25 percent bracket and those earning up to $1 million would fall in the 35 percent bracket. Those making above $1 million will be in the 39.6 percent bracket, which is currently the top rate for millionaires. For unmarried individuals and those filing separately, the bracket thresholds would be half of these amounts, other than the 35 percent bracket, which would be $200,000 for unmarried individuals.
The proposal roughly doubles the standard deduction for middle-class families, expanding it to $24,000 for married couples, from $12,700, and setting it at $12,000 for individuals, from $6,530 today. Republicans also plan to expand the child tax credit to $1,600 from $1,000 and add a $300 credit for each parent and nonchild dependent, such as older family members.
The bill includes a host of changes that will impact taxpayers in different ways. For instance, it repeals certain tax credits, including a 15 percent credit for individuals age 65 or older or who are retired on disability. Right now, those individuals can claim up to $7,500 for a joint return, $5,000 for a single individual, or $3,750 for a married individual filing a joint return.
The House bill would entirely repeal that tax credit. It would also repeal the adoption tax credit, no longer allow deductions for tax preparation and repeal credits for alimony payments. And deductions for moving expenses would no longer be allowed.
One of the biggest flash points will be proposed changes to the popular mortgage interest deduction. Under the Republican plan, existing homeowners can keep the deduction, but future purchases will be capped at $500,000.
The National Association of Realtors came out swinging against the bill, suggesting a huge fight awaits over how real estate is treated.
“Eliminating or nullifying the tax incentives for homeownership puts home values and middle-class homeowners at risk, and from a cursory examination this legislation appears to do just that,” said William E. Brown, president of the National Association of Realtors. “We will have additional details upon a more thorough reading of the bill.”
Jerry Howard, chief executive of the National Association of Homebuilders, said he was very disappointed in the Republican tax plan and warned that it could create a recession in the housing market.
“It puts such severe limitations on home buyers ability to use the mortgage interest deduction that home values will fall,” Mr. Howard said in an interview. “If a home seller takes a loss, that’s money they were counting on for retirement.”
Mr. Howard said the bill amounts to a broken promise.
“Contrary to their assertions, the Republicans are picking winners and losers,” he said. “They are picking rich Americans and corporations over small businesses and the middle class.”
Additional changes to individual income taxes would include a complete elimination of the deduction for medical expenses and the eventual end of the estate tax over the course of six years. In the intervening time, the level of which estates would be taxable would increase to well over $5,000,000. The plan would also place limits on the deduction for state and local property taxes, limiting the deduction to $10,000. On the corporate side, there would be significant changes for multinational corporations as part of an effort to encourage those corporations to bring profits made overseas back to the United States for investment and other purposes. Additionally, there would be significant changes for so-called “pass-through” entities such as LLC’s and Limited Partnerships that both small and large businesses often utilize as tax shields for specific business operations. As with the cap on mortgage interest, many of these changes are already facing significant challenges from the industries that would be impacted and from Members of Congress representing parts of the country where taxes and home prices for even middle-class families are sometimes well above the limits that the bill sets. This includes both Republicans and Democrats and could make keeping the Republican caucus in both the House and the Senate united. Additionally, the changes in corporate taxes are likely to be the main sticking point for Democrats opposed to the bill, who will likely point the extent to which things like pass-throughs are used more often by high-income earners rather than the “mom and pop” businesses that the GOP highlighted during their rollout today.
As I noted yesterday, the fate of this bill is far from certain regardless of how much boasting Republican leadership may do in the days and weeks ahead. For one thing, the calendar that they face is far shorter than it even appears on paper. If they are going to get the bill through the House of Representatives before the Christmas break, it’s going to require everything to go perfectly and it’s clear already that this isn’t going to happen. Lobbyists for the real estate will be all over the mortgage interest and state/local property tax deduction issue, as well Members of Congress on both sides of the aisle from areas such as the West Coast and Northeast that would be adversely impacted by the changes the bill would make to these parts of the tax codes. They and other opponents will do everything they can to reinstate the deductions that are targeted even though any effort to do so would likely upset the delicate balance that already exists in the bill. A good part of the bills fate will also depend on what the Congressional Budget Office has to say about it and, specifically, its impact on future budget deficits and the national debt. A bad score for the bill, for example, would make the job of keeping the Republican caucus united even more difficult. Additionally, we’ll have to wait to see how the public reacts to the bill, especially since current polling indicates that the bill is generally supported by only one-quarter of Americans. If that remains consistent, then it too will impact the fate of the bill in both the House and the Senate. Even if the bill makes it through the House successfully, it’s fate in the Senate is far from clear. As it stands, Majority Leader Mitch McConnell will be able to utilize the reconciliation process to attempt to push the tax bill through but, as we saw with health care reform, that doesn’t necessarily mean that he’ll be able to get the 50 vote minimum that he would need to pass the bill with Vice-President Pence’s tie-breaking vote.
Here’s the bill itself, all 400+ pages of it:
Tax Cut and Jobs Act by Doug Mataconis on Scribd
Over at Breitbart, they are celebrating this as “breaking the backs of libturd state governments” with the sales tax bit. They know damn well it’s a bad bill but since it hurts people they hate as much or more then them, it’s something to cheer for. It’s pure political punishment and they’ll bend over without Vaseline to get it done.
Unless you are fabulously wealthy, the hosing is about to begin.
“Unless you are fabulously wealthy, the hosing is about to begin.”
Yep. Look at this analysis cited by Matt Yglesias at Vox:
“Big-picture summary is that over the first 10 years, the bill has:
$1 trillion net tax cut for business owners
$172 billion tax cut for people who inherit multi-million dollar estates
$300 billion net tax cut for individuals.”
Of the tax effects for individuals, about $1.8 trillion of the $3.3 trillion is savings is for the wealthy (changes to the tax rates and eliminating the Alternative Minimum Tax), while the rest goes to items which affect the majority of taxpayers (doubling the standard deduction and increasing the child care tax credit). On the other hand, $2.9 trillion of the $3 trillion in tax increases affect the majority of taxpayers (repealing personal exemptions and itemized deductions).
This one stinks on ice.
@KM: I think the people comment at Breitbart have the same mentality as the people who taunted Jews on Kristallnacht.
This bill should be called “The Donnie and Ivanka Billion Dollar Boondoggle”.
I think that Blue States, like CT where I live, should say fvck you…we aren’t supporting the Red States any longer. We will carry our fair share, but no more.
We have some pretty big budget issues here in this state. At the same time we get back about 69% of what we send to Washington. Kentucky, Mitch McConnell’s state, gets back $1.50 for every dollar they send. So if Republicans want to fvck with the Blue States then I say we level the playing field. I’m sure tax payers in California, New York, and New Jersey would agree.
Of course the Fat Orange Blob should also release his taxes so we can tell how much he is going to benefit from this legislation, and just how big a conflict of interest this clusterfvck really is.
I remember when deficits mattered.
I also remember when being fiscally conservative meant trying to avoid large, pointless deficits in good times, rather than simply cutting taxes. I might have confused that with fiscally responsible though.
@Daryl’s other brother Darryl:
“I think that Blue States, like CT where I live, should say fvck you…we aren’t supporting the Red States any longer. ”
So you support ending the state income tax deduction? Cool.
“I remember when deficits mattered”
Damn. You old.
The Republicans will pass this no matter how bad. Because they don’t care any more about results for the American people. And it will get worse. They already cooked in $1.5T in increased debt. I suspect the books will be cooked so that increased debt will be $3T or more. The next step is that they will have to cut Medicare and Social Security because of the debt they create. It really is all laid out in Ryan’s Better Way plans.
Don’t count on reason and reality to bail the country out. They don’t care.
@Daryl’s other brother Darryl:
I thought about that and I can’t figure out how to do that: Vote against every farm bill? Let Texas fund their own disaster aid? I guess you could go down that road. But cutting Medicaid, food stamps and such is what they want to do anyway. They don’t even care about their own red states.
There’s some stuff to like in this bill (e.g. capping mortgage deduction) but their desperation to cut revenues is the biggest problem. As I said, I’d support a revenue-neutral version.
@B. R. Bong:
If Red States start being fiscally responsible? Sure. But they’ve been welfare queens so long I doubt they can.
@B. R. Bong:
I got $100 you’re on the gov’t teet, too.
The WashPo today announced that their analysis shows 97% of middle class payers will receive a tax cut.
Must mean that the top 20% now pay 96% of all income taxes, up from 95%.
i am not a numbers guy, let alone an accountant. But the ‘territorial taxation’ in the bill sounds pretty damn good. To me.
Someone smarter than me correct me, please, but the way it looks is that corporate income I make abroad is not taxed coming into the US. So, I believe under this proposed law I could form a corp in a corporate tax-free nation, (Bahamas? Caymans?) transfer all my IP to that country and corp, and pay zero corporate taxes. 100% of my royalties would be earned by that tax-free corp. I’d be able to repatriate money from one corp (Bahamas) to another (US) and pay squat.
I’d only have to pay taxes on whatever I paid myself as income. My overseas tax-free corp could buy overseas houses, company cars, provide medical, etc… without ever coming to the attention of the IRS as income. My putative income could be down to whatever I need for tips.
That’s too good to be true, right?
@Hal_10000: “There’s some stuff to like in this bill (e.g. capping mortgage deduction) ”
Yes, the destruction of the nation’s housing market would certainly be an unalloyed good, especially if it’s in service of making sure Don Jr and Ivanka don’t have to pay taxes on their inheritance.
Hey, maybe we could put a 10,000% tax on food, and then give the proceeds to billionaires. That couldn’t hurt, either.
You claim to be a money guy…but think a couple hundred bucks means anything.
Jives with what we know of you.
I think you always knew you and I were going to be better off.
And we both know this won’t help the economy.
@Daryl’s other brother Daryll:
Not two minutes ago I said just that to my wife. “Whatever else the GOP will make sure the rich get richer.”
Oh, for Pete’s sake. That vast majority of people don’t even use the mortgage deductions, since it’s smaller than their standard deduction. And if the GOP really does increase the standard deduction, that will be even fewer people the interest deduction benefits. The main beneficiaries are upper class people with expensive homes and I see no reason to subsidize that.
Speaking of subsidies for rich people … looks like they will eliminate the tax exemption for public bonds if those bonds fund pro sports stadiums. It’s a tiny drop in the bucket, but good on them.
I *think* that’s addressing the double taxation of overseas earnings. If an American company earns money in a foreign country and is taxed in a foreign country, they are taxed again when they bring that money back to the US. We’re one of the only countries that does that since most countries think companies earning money overseas is a good thing. They money will still be taxed when it’s paid out in salaries and dividends.
Currently looking online at real estate in Bahamas and Guernsey.
@Gustopher: Well yeah, but these aren’t good times. The Obama years were a disaster! Absolutely disasterous! And many people are suffering. Really painful bigly suffering. And hurting. But this bill will change all of that by putting us on the road to having the greatness that we had before. It’s a great bill. First class! Amazing people have put this bill together! Amazing! Really great people.
I’m not sure that’s how this will play out. People who take the standard deduction don’t contribute any appreciable amount to tax revenues. Among people who itemize deductions, eliminating the mortgage deduction has a much larger impact on the low end of the income range, because for people who aren’t really wealthy but have been sold on The American Dream of Home Ownership, that mortgage is their biggest deduction and the fraction of a home they own is their biggest asset. This really screws them; their tax bill goes way up but their wealth and income do not. Look for default rates to ratchet back up.
And, for better or worse, the pyramid scheme that is homebuying drives a big chunk of the economy. We saw in 2008 what happens when you mess with that. Would the US be better off, in the long run, if people who can’t really afford to buy homes didn’t try? Sure. Is this the low-impact way to get there? Not in the least.
@Hal_10000: I think that the elimination of tax benefits for bond holders of sports stadium bonds will simply result in governments linking stadium bonds to other purposed bonds (school construction, for example) to create obscurity in how much interest should be excluded. I wish it wasn’t the case, but look for more “multi-purpose” bonds in the future.
For just a second, I’m going to put on my old conservative-person hat and note that they way best way for the government to discourage people from buying homes that they can’t afford is to stop authorizing lenders to create loan schemes and programs that help people with marginal financial stability qualify for mortgages and buy homes.
Regulations that would inhibit speculation in housing markets would probably also help, but even old conservatives were not against speculation when it benefited them personally, so…
I think I remember reading that deduction of interest for second homes is eliminated which I think is a good thing. Though deduction of interest for rental purposes is still there, I think.
I thought the mortgage interest deduction was only for primary residences. I’m not an expert; correct me if I’m wrong.
Having been born in the late 1970s, I do not have any direct memory of when Republicans advocated true fiscal responsibility. I’ve only read about it in books.
In fact, the very phrase “fiscal conservative” is misleading. When people use the term today, it means one of the following two things:
(1) Someone who believes in keeping deficits low and working toward a balanced budget.
(2) Someone who accepts the economic program of the modern-day GOP.
These two definitions are in conflict, because the modern-day GOP does not advocate policies that lead toward lower deficits or balanced budgets, and it hasn’t done so since the rise of Reagan, when it shifted its economic priorities squarely from advocating lower deficits to advocating lower taxes. But the conservative movement has become so mired in the supply-side myth that lower taxes lead to lower deficits–despite the mountain of evidence proving the very opposite–that it refuses to acknowledge any change has taken place at all. Republicans benefit enormously from the fact that many people–even politically knowledgeable people–don’t realize how much the old frames about budget discipline no longer apply to today’s GOP.
I highly recommend Jonathan Chait’s 2007 book The Big Con for a thorough analysis of how this evolution happened. The topic tends to get short shrift in political discussions through the simplistic binary division commonly made between economic issues and social issues. In today’s discourse, “fiscal conservative” is often used as a shorthand for any conservative who wants people to know they aren’t, say, anti-abortion or anti-gay. “I’m a fiscal conservative but social liberal” is a favorite bromide of Very Serious People, a way of signaling a commentator’s sophistication, that they advocate responsible policies and are not simply some gun-toting redneck.
It’s also deeply misleading. Grover Norquist may not be a social conservative, but that does not make him a “fiscal conservative.” Indeed, Norquist is in many ways responsible for the fiscal hellhole the Bush Administration put our country in, with his utterly dumb no-tax pledge he got virtually the entire Congressional GOP to adopt.
It wasn’t always like this. In the 1960s Barry Goldwater voted against Kennedy’s tax cuts. Conservatives have always favored tax cuts in principle, but this notion that they’re the be-all, end-all of everything is very much a modern development, and a uniquely American one, too. It’s one of the less-talked about ways in which the party went completely off the deep end.
I’m considering buying a Chevy Bolt.
And the federal deduction for electric cars is on the chopping block as well as the mortgage deduction.
It isn’t the quarter of the American population that supports the plan that is at the center of GOP worries; it’s the mouth-breathers who will vote in next spring’s primaries that gets their concern.
Well, we had that chance 157 years ago, but Lincoln decided that he wanted to keep the Red States around.
Looks like they’re also going to stop subsidizing Elon Musk!
@Hal_10000: “nd if the GOP really does increase the standard deduction, that will be even fewer people the interest deduction benefits. The main beneficiaries are upper class people with expensive homes and I see no reason to subsidize that.”
Just wondering, which part of Arkansas do you live in? Because if you lived anywhere that anyone actually wanted to live — or if you ever lifted your gaze from your own navel — you’d understand that the most productive parts of this country have real estate markets in which one million dollars barely buys a one-bedroom apartment, and half a mil gets you a four-hour commute.
I’m sorry you see no reason to help out the people who actually keep the nation’s economy growing, but I’ll make you a deal. I’ll support removing this deduction as soon as the government decides that the blue states — you know, where they actually produce economic growth — don’t have to keep seeing their tax dollars confiscated and sent to the taker red states. Let the “conservative” states raise their own taxes to pay for their services instead of sucking off the real producers, and then we can talk.
@B. R. Bong: “Looks like they’re also going to stop subsidizing Elon Musk!”
Hey stupid — You realize that this bill is going to give Elon Musk probably billions of dollars, and protect his heirs from ever having to pay a penny?
It’s astonishing how dumb Trump voters are. Here’s a bill that will probably screw him over in a dozen ways, but he loves it because he thinks it will cause harm to someone the right wing media told him was a nasty lib.
And of course this bill will be a windfall for Musk — but again, he’s convinced himself he’s sticking it to the man, so he’s happy.
Any tax reform must include a good cut for the middle class working people. And simpler forms. One other idea would be a straight deduction for medical expenses; instead of that ridiculous percentage of gross income, which few people meet.
I have found the IRS people to be courteous and helpful. They do try to work with people. The problem is the long, long telephone waits, and high interest charges if you have a payment plan with them.
@Tyrell: “They do try to work with people. The problem is the long, long telephone waits, ”
Which is directly attributable to the fact that the Republicans keep cutting the IRS budget so that it can’t function.
Whatever gave you the idea that you actually had to LIVE in the Caribbean to be incorporated in the Caribbean? 😀
My corporation (such as it is …) exists in Grand Cayman, Dublin and Amsterdam. I live in Paris. I pay no US taxes. Zero. Zippo. NaddaDime.
Primary and secondary, capped at $1million of total mortgage debt.
You’re my new hero. Normally I pay my taxes with as much grace as can be managed while writing six figure checks to IRS. But I have no qualms at all about starving this administration of whatever funds I can.
Given the nature of your income stream (entirely IP), you are particularly well positioned to play ball in Ireland. The asymmetries between US and Irish tax domicile determination are a dream come true, the misplaced predictions about the death of Double Irish with a Dutch notwithstanding.
Taxation law is about as exciting as watching paint dry, but if you want more info I’ll expand on the concepts involved.
Note that you don’t have to live there either to benefit from it. 😀