$1.5 Trillion GOP Tax Cut Thread

[mvd10]

Yes, but the question in what areas most of the 1.5 trillion is coming from. If it is coming from Income/Dividends/Capital Gains then this tax plan would be fiscally irresponsible, but if its coming from cutting taxes on Businesses then it is not fiscally irresponsible as you will get that lost revenue back in economic growth.  

This is a myth. Kansas is the prime example.

The main problem with Kansas was that they exempted pass-through businesses from the income tax which caused a lot of tax avoidance. The GOP plan also does this though. The top rate on normal income would be 35% while the top rate on pass-throughs would be 25%. If I were a wealthy architect or lawyer I'd definitely become an independent contractor in that case. Helping small businesses is a good thing, but I think they should look for better ways.

If they really reform the tax code (lower corporate tax rates, broader base, more equal treatment of debt and equity, etc) I don't think a $1.5 trillion tax cut would be a huge problem, especially if they offset (part of) it by spending cuts, or if they make the doubling of the standard deduction temporary.

But I don't think temporary full expensing is a good idea. It will cost a lot of revenue in the next 5 years, without doing much except for getting businesses to move some of their investments forward. That's good when you're in a recession, but the US isn't in a recession. If they wanted a more friendly tax treatment of capital investments they could have adjusted depreciation schedules to an interest rate to offset inflation or the time value of money. That way it would have the same effect as full expensing, but instead of costing a boatload of money in the first few years the costs would slowly phase in. Temporary tax cuts usually aren't really a good idea unless you're in a recession and need an immediate stimulus (in that case spending would be even better though).

[mvd10]

If Dems were smart, they would run against this as "robbing the cities to pay for the countryside."  Let's see how all those Clinton-Republican districts feel about not being able to deduct their state taxes any more.

A large part of them still would receive a tax cut though. 79% of taxpayers in the fourth quintile and 67% of taxpayers in the top quintile would receive a tax cut. I guess these numbers are significantly lower in NY or NJ but it's not like all of them would see a massive tax increase.

[mvd10]

Yeah, a pure tax cut would be a bad idea. The US needs tax reform, and preferably revenue neutral tax reform (without extremely rosy growth predictions). We're probably still heading towards a corporate rate cut and a standard deduction increase without any offsets. Tax reform is dead the moment Roy Moore (or his Democratic opponent) becomes senator, so they're desperate for anything they can call a victory.

[mvd10]

Yeah, a pure tax cut would be a bad idea. The US needs tax reform, and preferably revenue neutral tax reform (without extremely rosy growth predictions). We're probably still heading towards a corporate rate cut and a standard deduction increase without any offsets. Tax reform is death the moment Roy Moore (or his Democratic opponent) becomes senator, so they're desperate for anything they can call a victory.

Wait, what?

Like Hindsight said: Moore is an extreme ideologue (and his hatred for McConnell also doesn't help). I can't see him playing nice with the GOP leadership on tax reform, he'll probably vote against any proposal that doesn't completely repeal the income tax lol.

Yeah, a pure tax cut would be a bad idea. The US needs tax reform, and preferably revenue neutral tax reform (without extremely rosy growth predictions). We're probably still heading towards a corporate rate cut and a standard deduction increase without any offsets. Tax reform is death the moment Roy Moore (or his Democratic opponent) becomes senator, so they're desperate for anything they can call a victory.

So, do you think cutting taxes on the bottom two by 7.5% and on those in the third lowest making less than $60,000 by 5%, as well as cutting the bottom three corporate tax rates by, say, 7-8% would be enough? Of course, ideally we'd see a small federal sales tax to make up for it.

Cutting taxes on small businesses and lower- and middle-income households while paying for it by a sales tax/VAT seems like a good approach yeah (I believe it's also what the IMF recommended), but I'd also cut the top corporate tax rate as 35% is ridiculously high. But it's obviously not going to happen. Trump apparently is a VAT fan but the Freedom Caucus never would vote for a sales tax unless it also included complete repeal of the income tax and the 16th amendment.

[mvd10]

Mr. Sanders proposes an amendment, #1119 (To reverse Medicaid cuts and reduce certain tax cuts). The amendment FAILS by a vote of 47-51.

Party line vote or did 1 Republican vote with the Democrats (Collins?)?

[mvd10]

Ms. Capito proposes an amendment, #1393(To help provide tax relief to middle-class Americans by reducing deductibility for Federal tax purposes, of federal deductions, such as the state and local tax deduction which disproportionally favors high-income individuals). The amendment is adopted by a vote of 52-47.

Oh no.

The senate always was going to vote for repealing the State and Local deduction anyway, there aren't much blue state (or high-tax state ) Republicans in the senate. But states like California, NY and NJ have a lot of suburban wealthy Republican districts, and they are the ones that probably will sink tax reform.

Anyway, personally I support repealing the state and local tax deduction if it's necessary for tax reform, but I understand why people in a blue states are pissed off by this, especially since there is a net money flow from blue states to red states (though that doesn't mean there is a money flow from Democrats to Republicans as wealthy people in rural areas/red states are extremely Republican while poor people in these rural areas aren't that Republican. Meanwhile in wealthy blue states there isn't really a correlation between income and voting habits).

[mvd10]

Won’t be on for long, but I thought I should note that if a 5% VAT would raise $1.8 trillion(which I saw in one source), a 17.5% VAT would raise $6.2 trillion, and even a 10% VAT would raise $3.6 trillion. At that rate, surely some way could be found to balance the budget.

A VAT would raise even more. A broad-based VAT (which includes things like food though) would have a tax base of 40-50% of GDP, which means a 5% VAT would raise 2-2.5% of GDP (I guess that's $5-6 trillion over a decade).

I strongly believe the VAT is the solution to all American tax problems. Just use a VAT to repeal the corporate income tax (Republicans must like this) and to expand working/middle-class tax breaks like the child tax credit and the standard deductions (Democrats should like this) and you have a tax code that's much more efficient and much simpler and while also raising the same amount of revenue (and if you partially offset the cost of corporate tax repeal with small tax increases on capital gains it also wouldn't increase inequality).

But it's a political nonstarter because Democrats don't like regressive taxes (they're afraid Republicans will raise it because it's regressive) while Republicans don't like new taxes in general (and indeed there is a case to be made that it's the VAT which caused bloated European welfare states).

[mvd10]

So the Dems are now defending a tax deduction that disproportionally favors the wealthy. Why would you do that when you could also vote for a tax cut that disproportionally favors the wealthy ?

[mvd10]

So the Dems are now defending a tax deduction that disproportionally favors the wealthy. Why would you do that when you could also vote for a tax cut that disproportionally favors the wealthy ?

It's actually not that incompatible. SALT is used more by middle- to upper-middle-income earners in these suburbs (and yes, the super rich, but the middle income earners outnumber the super rich in the beneficiaries group). This would likely still bring taxes up on people already highly taxed in those states while not closing any real loopholes and slashing income taxes across the board for every other bracket.

Anyway, why would a political committee not do this? Isn't the point of committees to win elections?

It was a joke, but you're right that it's politically smart to do this. And even though it's not as lopsided as some other charitable itemized deductions it's still the wealthy who benefit the most from the SALT deduction if you look at after tax income. But you're right that there are a lot of upper middle-class people who benefit from the SALT deduction.

Anyway, I'd rather see them eliminate the mortgage interest deduction since the mortgage interest deduction really doesn't have any rationale (while the SALT deduction atleast prevents double taxation).

[mvd10]

Their study isn't complete though. They didn't model repealing some business tax expenditures or limiting the interest deduction because Trump didn't specify how he wanted to limit/repeal those deductions, but these measures could easily raise more than $1 trillion over a decade (then again, it's Trump's fault that he wasn't specific).

[mvd10]

Republicans seem to be considering adding another income tax rate for very wealthy people to pay for their proposals

I think this is a good idea. It really doesn't matter much whether the top rate is 39.6% or 35% imo (though I oppose actually raising the top rate above 40%). Reforming the corporate tax system is the most important thing. And perhaps some Democrats will be tempted by a tax plan that keeps income taxes on high incomes the same (though high incomes probably still will benefit from the massive corporate tax cut of which a large part probably would go to shareholders).

[mvd10]

Meh, not a fan of the student tax, but overall it seems like a decent plan (though it could have been cheaper and beter). But slashing rates and eliminating loopholes is the way to go .

[mvd10]

Punishment of education, nothing scares a conservative right-wing populist more than educated people.

[mvd10]

This bill is so f**king toxic and it is very clear the GOP is cynically going after the groups that didn't vote for them.  Lots of people will see a tax hike while corpoations and the super rich make out like bandits. 

This pile of bullsh**t needs to be killed with fire.

The GOP is going for lower tax rates, an higher standard deduction paid for by less loopholes (and higher deficits). That's pretty much the standard formula for tax reform. The only thing in the tax plan that I would describe as downright cynical is the endowment tax (and perhaps some of the measures for students). Repeal/limitation of the SALT deduction always was going to be part of a tax reform, it costs a huge amount of revenue so not touching it means you'd have to slash even more popular deductions/tax breaks (or you'd have to look at things like the VAT or the carbon tax).

I'm disappointed that they're not going further in limiting the corporate interest deduction. They could have used the revenue for further corporate tax cuts or deficit reduction.

[mvd10]

Upper middle class is 90k-250k

LMAO. Half of Americans make less than $30k per year; 71% less than $50k per year. To be in the literal Top 1%, all you need to do is earn $250k per year.

Your "upper middle class" figure basically applies to the top 10% of income earners minus the wealthiest 1%. There's nothing "middle" (and certainly not "median") about being in the top 10%.

I think he's referring to households instead of single persons. 50k is the median household income in the US. 34% of 2016 voters had household incomes of over 100k (but wealthy voters have higher turnout rates than poorer voters so the actual number is lower).

But yeah, America's broad definition is middle-class is ... interesting. I think this is one of the reasons that socialism never really got a foothold in the US. Class war isn't going to work when everyone with household incomes ranging from $30k to $250k considers themselves part of the same class.

[mvd10]

Something to watch that hasn't gotten much play: a proposed excise tax of 20% on gross payments from a US multinational to a wholly owned foreign subsidiary (https://www.politico.com/story/2017/11/06/house-gop-reform-corporate-tax-avoidance-244591).

It's a revenue raiser of $155Bn over 10 years, but is being fought by, among others, Koch-backed AFP. If it's successfully killed, the bill loses the ability to pass through reconciliation, assuming there aren't any other revenue raisers added to make up for the lost revenue.

Ironically, this was one of Hillary Clinton's biggest pet causes.

Eh, the excise tax isn't exactly aimed at inversions. It's more of a base-broadening provision that'd make international planning strategies (e.g., using creative transfer pricing, loan interest payments, etc. to shift profits to low tax jurisdictions such as Luxembourg, Ireland and the Netherlands) less lucrative.

In the current Code, base shifting to the point where no country has claim to a particular income strain is the problem that this provision is intended to correct. For some more background, the NYT has a great article out today about Apple's international tax strategies over the past decade, particularly incorporating in the small channel island of Jersey (https://nyti.ms/2hMV2Gw)

Inversions have already become a less lucrative strategy with the negative publicity and IRC 7874's passage.

<33333

Our corporate tax actually isn't that low (25%, will be cut to 21% in a couple of years), but we have some very weird corporate tax gimmicks. Some of these loopholes will be closed in the next couple of years, but this will be combined with other tax measures to make the Netherlands more competitive (reducing the corporate tax and repealing dividend taxation).

(sorry, I couldn't resist to post about the Netherlands in a completely random topic)

Anyway, if the excise tax fails I'm pretty sure they could raise another $150 billion from the corporate interest tax deduction. Most Republican candidates proposed fully repealing it, but the GOP tax bill only symbolically limits it for the largest corporations.

[mvd10]

Any chance swing-district Republicans get cold feet about this after yesterday's results?

They passed a healthcare bill with a 15% approval rating. Don't hold your breath.

Weren't they pretty sure that it wouldn't have passed the senate anyway back then? Was there any moment when it looked like Obamacare repeal would actually pass both chambers?

[mvd10]

Not all suburbs are in high tax states. The suburbs are trending away from the Republicans because of their virulent anti-intellectualism and because of Trump's general incompetence (they probably know how Europe views Trump lol). If Roy Moore takes over the GOP they're f**ed in the surburbs. But I doubt this tax plan will cause much anger in suburbs outside of NY, CA and NJ. 88% and 87% of voters in the fourth and fifth quintile would see a tax cut under Trump's plan in 2019. By 2027 these numbers would have dropped, but they still would be 71% and 62%.

[mvd10]

Honestly, the Senate Bill looks decent. The bottom tax bracket is kept at 10% instead of being raised, the existing 7 bracket system is kept with only slight rate reductions, and a bunch of worthwhile deductions that are eliminated in the house bill are kept in the Senate Bill. I also like the fact that the corporate reduction isn't in full effect until a year has passed. I would prefer that some of SALT is kept, but whatever. Really, my only major grievance with this is the deficit increase, and that's not enough on its own for me to oppose this.

Why does the bottom rate matter? The poorest voters won't even pay any income taxes because of the increased standard deduction, so whether the rate is 10% or 12% really doesn't matter.

Honestly, the Senate Bill looks decent. The bottom tax bracket is kept at 10% instead of being raised, the existing 7 bracket system is kept with only slight rate reductions, and a bunch of worthwhile deductions that are eliminated in the house bill are kept in the Senate Bill. I also like the fact that the corporate reduction isn't in full effect until a year has passed. I would prefer that some of SALT is kept, but whatever. Really, my only major grievance with this is the deficit increase, and that's not enough on its own for me to oppose this.

I mean what the hell is the point of even doing this if you are going to keep the same number of brackets.

The rates would be lower. And the number of brackets isn't what makes the tax system complex. It's the hundreds of tax credits and deductions.

[mvd10]

They're f**ing serious? 13 million people will lose their insurance because of this, and it would raise something like $400 billion over a decade, which is something like 0.15% of GDP (a rather small amount of money that easily could be raised by further limiting some deductions or accepting a slightly lower standard deduction).

[mvd10]

People to watch:

-Johnson
-Collins
-McCain
-Murkowski

Also, the deficit Hawks: Paul, Corker, potentially Lankford

What about Flake?

Flake has no spine, sorry.

Based on what? He wrote that book knowing it would put a giant target on his back, and has been the only Republican to endorse Jones. He also has nothing to lose anymore.

The problem is that Flake probably actually supports this bill. This is a generic supply-side Republican bill. Why would a Reagan/Goldwater conservative oppose this? Most of the deficit alarmism by movement conservatives during the Obama years was fake anyway (as these conservatives all voted for the Bush tax cuts and medicare expansion). Flake's problems with Trump are Trump's unorthodox positions on trade, immigration and perhaps social security/medicare. Why would he then oppose a tax bill that is the epitome of what the Republican establishment wants on tax reform?

[mvd10]

Barbara Comstock voted to raise our taxes. Bad.

She knows she's done, she doesn't have to pretend to be moderate anymore.

Did she ever "pretend" to be moderate on economic issues?

Is this bill even that radical anyway? The $1.5 trillion it adds to the deficit is bad, but it's a lot less radical than what the 2016 GOP candidates or even Romney in 2012 proposed. Only 13 nays is a good sign right? Anyway, I hope the repeal of the Obamacare mandate won't be part of the final bill. Including healthcare "reform" in a tax bill isn't a good idea.

[mvd10]

They also need to use the "TAX RAISERS!" clubs to knock Costello and Meehan and Fitzpatrick too. I can almost see the suburban ship wreck in the distance

I can already smell the young suburban Democratic professionals .

But honestly, I don't think this tax plan will be the main cause of the coming suburban curbstomping (it's coming though ). Even most VA-10, IL-06 or NJ-07 voters would see a tax cut. The problem is that the media has been covering this as if everyone in a high tax state would pay more in taxes, which isn't true.

RIP Graduate Students, Research Programs, and Higher Education/Professionalization institutions in this country if this passes.

Music to the GOP's ears.

They want more racist uneducated hicks and less grad students. Please and thank you.

We don't take kindly to no fancy, high-falutin Yankee book-learnin'! - 2/3rds of the GOP

45% of Trump voters has a college degree tho.

[mvd10]

There aren't any NJ/CA/NY/IL GOP senators so they don't have to worry about angey constituents from high tax states. I think most of the deficit hawks will fall in line. I would worry most about Collins, Murkowksi and perhaps McCain.

[mvd10]

Johnson is a no because it doesn't do enough for small businesses in his view. This means they can only afford to lose 1 more vote, which would be very hard. I guess Paul would only support a tax bill that eliminates the mandate while Murkowski/Collins/McCain probably are no fans of repealing the mandate (I assume the other will fall in line because of party loyalty/actual belief in this bill). It will be hard, but they really have to pass something don't they? ACA repeal was different because that would screw over millions of people very badly, and while this bill has it's losers it should be broadly beneficial to the majority of Americans (atleast financially in the short term).