- Sen. Ted Cruz says ‘every American’ needs to get a tax cut
- A new Joint Committee on Taxation analysis shows 20 per cent of Americans would get a tax increase by 2027
- 14 per cent of people in the $50,000-$75,000 income range would see a $500 hike
- The House bill being marked up slashes corporate rates
- Two-thirds of those making more than $1 million would get a tax cut
- Senate tax-writers are considering a delay in the corporate tax cut
Texas Senator Ted Cruz is throwing shade on a House GOP tax cut bill after a nonpartisan analysis showed a fifth of Americans would see a tax increase within a decade under its terms.
‘The House and Senate — I think we need to do even more to provide a tax cut, not just tax reform, but a tax cut for every American,’ said Sen. Ted Cruz, a Texas Republican who lost the GOP presidential nomination to Donald Trump.
A new Joint Committee on Taxation analysis shows 20 per cent of Americans would get a tax increase by 2027. By contrast, two-thirds of those making more than $1 million would get a tax cut.
Households earning more than $1 million would see after-tax incomes go up by 3.2 per cent under the bill, according to the Center for Budget and Policy Priorities – 16 times greater than the increase for any other group on the lower end.
‘I think we need to do even more to provide a tax cut, not just tax reform, but a tax cut for every American,’ said Sen. Ted Cruz, a Texas Republican
The think tank concluded 45 per cent of the benefits would go to those earning more than $500,000 per year, or less than 1 per cent of filers.
Senate tax-writers are considering a delay in the corporate tax cut. The Senate Finance Committee is expected to unveil its tax cut bill Thursday, while the House went ahead with a markup of its own legislation.
Senate tax-writers also don’t want to go down to four income tax brackets from seven, something the House bill does and President Trump has hailed, the Washington Post reported.
The House Republicans’ tax-cut plan springs from a core argument: What’s good for big business and the moneyed elite is inevitably good for the economy and everyone else.
Majority Leader Kevin McCarthy, R-Calif., joined by Speaker of the House Paul Ryan, R-Wis., touts the GOP tax reform plan being crafted in the Ways and Means Committee this week, wuring a news conference on Capitol Hill in Washington, Tuesday, Nov. 7, 2017. (AP Photo/J. Scott Applewhite)
House leaders are hoping for a vote as early as next week on their legislation.
Their plan would slash corporate tax rates, end inheritance taxes for the ultra-rich and create new tax advantages for business owners. To help pay for some of those breaks, the plan would end tax deductions for college loans, high medical bills, moving costs and state and local income taxes.
Over the next decade, the House Republican tax plan would disproportionately favor corporations and wealthy individuals. The rich wouldn’t all benefit the same; the plan exhibits a preference for inherited wealth. But President Donald Trump and GOP lawmakers have asserted that, over time, the benefits of the tax cuts would trickle down to the middle class in the form of new jobs and pay increases.
It would also add $1.4 trillion to the national debt over 10 years.
Taken as a whole, the tax plan would drastically lighten the burden on the powerful groups that Republican leaders say would strengthen the economy while eliminating some benefits for the middle class they’ve called their top priority.
Some new benefits for ordinary households – like a family credit – would expire in five years. And some existing benefits would erode with inflation.
But the Trump administration and Republican lawmakers argue that the goodies they would bestow on corporations and the wealthy would, in the political parlance of the 1980s, inevitably ‘trickle down’ to everyone else.
Analyses from the White House contend that cutting the tax rates that corporations pay would ultimately result in $4,000 in additional income annually for the average U.S. household. It’s a claim that many mainstream economists have disputed as improbable. And it’s provided Democratic lawmakers with a rhetorical line of attack against the tax cuts: They’re fundamentally unfair.
On Monday, as the House Ways and Means Committee worked its way through the bill, Rep. Suzan DelBene stressed what she described as the inequality at the heart of the bill.
‘If a worker in my district had to move because his employer is forcing him to relocate his family or potentially lose his job, can he deduct his moving expenses under this plan?’ asked DelBene, a Washington state Democrat.
No, she was told by Thomas Barthold, chief of staff for Congress’ Joint Committee on Taxation.
‘But if a company, a corporation, decides to close its facilities in my district, fire its workers and move its operation to China, say, can it deduct associated moving expenses under this plan?’
Yes, Barthold said. That company could shrink its tax bill by deducting moving costs – something families could no longer do.
By cutting the corporate tax rate from 35 percent to 20 percent, the bill would reduce the tax liability of corporations by $846.5 billion over the next decade, according to the Joint Committee on Taxation. What’s more, businesses could deduct the expense of state and local income taxes. Families no longer could.
Companies could deduct the price of equipment bought for employees. Yet teachers could no longer deduct some of the costs of school supplies that they bought for students.
Nearly the entire net tax cut for individuals would come from two changes that would do nothing for most of the middle class: The government would repeal the alternative minimum tax, a provision that has long prevented many wealthy taxpayers from using loopholes to avoid paying taxes. The loss of the AMT would cause a revenue shortfall of nearly $700 billion over 10 years.
Also gone under the Republican bill: The inheritance tax on estates worth at least $5.5 million. That would let wealthy heirs keep an extra $172 billion over the next decade.
The plan would also allow business owners whose profits double as their personal income to pay, in part, at a discounted rate of 25 percent. This would cause the loss of an additional $448 billion over 10 years.
Given how these business owners are classified, the plan would let them deduct their state and local taxes from the equivalent of their personal income. By contrast, the employees of those business owners could not do so.
Taken together, that’s $2.17 trillion worth of benefits that would help mainly companies and the wealthiest segment of the U.S. population.
By getting rid of itemized deductions – such as for medical costs and state and local taxes – that now help many middle class and affluent taxpayers, the plan would raise an additional $1.26 trillion during the next decade.
This photo combo of file images shows Thomas Barthold, left, chief of staff for the Joint Committee on Taxation, in Washington, D.C., and at right, Suzan DelBene in Kirkland, Wash. The House Republicans’ tax-cut plan springs from a core argument: What’s good for big business and the moneyed elite is inevitably good for the economy and everyone else. Their plan lets businesses play by a different set of rules than families and individuals. DelBene stressed the unequal treatment at a House Ways and Means Committee markup of the bill on Monday, Nov. 6, 2017. Barthold responded to questions from the committee during the session. (AP Photo/J. Scott Applewhite, Ted S. Warren)
Chairman of House Ways and Means Committee Rep. Kevin Brady (R-TX) holds up a postcard size tax form during an event at the Newseum November 3, 2017 in Washington, DC. Rep. Brady participated in a Politico Playbook interview on congressional efforts on tax reform
Every tax overhaul tends to create some layer of inequality. The best chance for faster growth often comes from lowering corporate rates and clearing the underbrush of loopholes where companies can hide cash. What makes this tax plan unusual is that many of the tax breaks that Republican lawmakers and President Donald Trump would like to preserve for companies would be taken away from families and individuals.
The solution isn’t simple. Lowering corporate tax rates can help make the United States more globally competitive. It can also help increase investment by domestic and foreign companies, which could spur job growth.
Yet critics note that the stock market is booming and the unemployment rate is an exceedingly low 4.1 percent. So the benefits for the job market could be minimal.
Still, advocates of the Republican plan argue that companies are ideally positioned to immediately invest savings from tax cuts.
‘Business investment is likely more responsive to changes in tax policy than households,’ said Scott Greenberg, a senior analyst at the conservative Tax Foundation, whose own analysis suggests that cutting the corporate rate to 20 percent – among other changes – would help generate roughly 1 million jobs.
US President Donald Trump speaks during a state banquet dinner with Japanese Prime Minister Shinzo Abe in Tokyo on November 6, 2017.Donald Trump described North Korea’s nuclear missile programme as a ‘threat’ to the world on a trip to Asia dominated by the crisis
Multinational companies already go out of their way to avoid U.S. taxes by shifting profits overseas or exploiting accounting rules. Research by Gabriel Zucman, an economist at the University of California at Berkeley, found that 63 percent of U.S. companies’ foreign profits come from known tax havens. Republicans are betting that companies would shift more of those profits back to the United States under their plan.
Relatively high U.S. corporate rates can also encourage domestic companies to be acquired by rivals based in countries with lower rates – mergers that can lead to job losses if headquarters, offices and factories derive a tax advantage from being overseas. By making the tax code more favorable for businesses, the bill could theoretically increase investment in factories, businesses and workers.
But the details of the Republican plan suggest that companies could find it harder to land the skilled workers they say they need. Over 10 years, for example, the plan would repeal roughly $64 billion in tax breaks that promote higher education.
College graduates could no longer deduct interest payments on student debt. Ph.D. students who teach and conduct research would be taxed on their waived tuition bill- an expense that could force some to drop out. There are about 145,000 graduate students who receive this tuition waiver. Most are concentrated in science, technology, engineering and math.
‘The tax bill as proposed goes completely in the wrong direction,’ said Steven Bloom, director of government relations at the American Council on Education, which represents many university presidents. ‘It’s undercutting our ability to produce the kind of educated workforce that we need to produce.’
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