Here’s where the tax bill stands as of today, as it heads to the required Joint Conference of House and Senate :
First, a list of some significant snags to be resolved —
(1) can’t have ACA mandate repeal. The House version doesn’t have it
(2) student debt interest : House version keeps this deduction, as it should
(3) medical expenses deductions : thank Susan Collins for the Senate Bill’s more generous allowance
(4) the Rubio-Lee proposal to increase the child tax credit and offset it by raising proposed corporate tax rate from 20% to 22% — this should have passed, but it split the GOP caucus and only nine Democrats voted for it. Perhaps they can try a re-vote and do better ? 45 now says that he would support a 22% tax rate for corporations, but the Democrats want it to be 25%.
(5) get rid of the carried interest deduction
(6) include a Bankruptcy Code change that allows most student debt to be dischargable. The current Code prevents almost all student debt from being relieved.
(7) repeal the ACA’s medical instruments tax — supported by MA’s entire delegation other than Liz Warren
(8) make individual tax cuts & credits permanent
( 9 ) assure that State and Local taxes remain deductible so that local and state budgets aren’t hemmed in financially any more than they are already
(10) tax credits for alternative energy must be retained. No tax bill at this time should favor fossil fuel energy.
Did you know that the House version actually includes a stepped up 45% tax rate in certain very high incomes ? I didn’t.
Lastly : the enormous cuts and credits accorded to most earners of 75 k or less means an enormous boost to consumer spending, which is 2/3 of the economy and is by far the major job creator. The GOP talking point for this tax bill is laughable and wrong, but there is enormous job creation in the individual tax cuts & credits themselves, nor the corporate tax cuts, which have other policy purposes — repatriation of funds parked overseas; advantaging investments — that may or may not occur.
What Democratic opponents of the tax reform do not seem to get , or dare to admit, is that its huge tax cuts & credits going to earners of under 75 k is exactly where they should go. The small percentage cuts for most high income earners are economically irrelevant. Those earners mostly save extra dollars. Small earners spend theirs, and there are about 100 million such households. They’re getting an annual money boost of about 3000 $ each = $ 300 billion annually. That’s about 3% of annual GDP. If it is spent, as I think it will be, every year out to 2025 (at least), the effects will be typhoon level.
To sum up : the good aspects of the tax bill are those that the Republicans do not emphasize, while the reforms that they do highlight seem fairly irrelevant and mistakenly advocated for. The tax bill’s economic boost will NOT come from corporate tax rate cuts but from the enormous increase in exempt income for people earning 75,000 or less. (The boost assumes that the final tax bill does NOT include ACA mandate repeal, a bad feature of the Senate bill.)
However : can any tax bill actually get enacted ? The nation is so bitterly divided on this proposal that it seems unlikely. Any tax bill passed without any Democratic support seems doomed to aggravate our already poisonous political split. Yet before we agree that Democrats must be brought into the discussion, there’s the problem that Democrats have already decided they don’t WANT to be consulted. I don’t see how it can be possible to erase that hostility. And if that’s the case, we aren’t likely to get a tax bill; or, if we do get one, it will be a disaster for politics generally.
Let’s see what happens. I doubt it will be happy.
—- Mike Freedbewrg / Here and Sphere