U.S. Tax Reform

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GOP tax plan would shrink mortgage interest benefit, slash corporate tax rate

The Washington Post  /  November 2, 2017

House Republicans on Thursday proposed the biggest overhaul of the U.S. tax code in three decades, a plan that would sharply cut tax rates for corporations and individuals while eliminating many popular deductions that Americans have long enjoyed.

At its core, the legislation would deliver the kind of tax relief to companies — $1 trillion over 10 years — that Republicans say will spark economic growth and encourage businesses to create more jobs and invest heavily in the United States.

Far less clear is the bill’s impact on middle- and working-class households. The trade-off between reducing tax rates but curtailing deductions — such as the amount homeowners can take off their mortgage interest payments — means the impact will vary widely from one family to another.

Many Americans who need to take out big loans to buy homes in expensive areas, such as New York, Boston and San Francisco, could see their taxes go up. The Washington region would be a prime example of the trade-offs. High salaries here at lower tax rates would deliver savings off Internal Revenue Service bills. But high home prices mean home buyers take out big loans. The D.C. region is home to six of the 10 counties where residents take the highest average mortgage deduction.

The GOP bill would also scale back the amount Americans can deduct from their federal bill because of taxes paid to state and local governments. That could punish those who live in states with high income taxes — states generally are governed by Democrats.

The uneven effects of the legislation — and the possibility that some middle-class Americans could see their tax bills rise — promise to complicate the Republican effort to unify behind the bill. Several powerful lobbying organizations, some long aligned with the GOP, vowed Thursday to fight the proposal.

But for Republicans, the tax push represents possibly their last opportunity to pass a major piece of legislation before campaign season begins for next November’s elections, when their majorities in the House and Senate will be challenged.

President Trump has put changing the tax code at the center of his domestic agenda, and the party holds enough seats in the House and Senate to pass the bill into law without support from a single Democratic lawmaker. But to succeed, GOP lawmakers will have to avoid the internal divisions that have undermined other major legislative efforts, including multiple failed attempts to repeal the Affordable Care Act.

The bill, unveiled by GOP leaders Thursday morning, would slash the corporate tax rate from 35 percent to 20 percent, the most significant in a series of benefits the bill contains for businesses.

In addition to the $1 trillion in total tax cuts over 10 years for businesses, the proposal would mean $300 billion in tax cuts for households and families, as well as $200 billion in tax cuts — almost all of which will accrue among the wealthiest families — by repealing the estate tax, according to estimates from the nonpartisan Committee for a Responsible Federal Budget.

The legislation is the result of months of negotiation among Trump administration officials and many Republican lawmakers, discussions that continued right up to the hours before the bill’s release.

On Wednesday evening, House Ways and Means Committee Chairman Kevin Brady (R-Tex.) suggested the party might wobble on Trump’s promise to permanently cut the business tax rate, instead having the rate expire after eight years as part of an effort to facilitate the bill’s passage in the Senate. But in a late change, Republicans extended the cut in the business tax rate, in part by scaling back the scope of a new “Family Flexibility Credit” for parents and non-child dependents that the bill would create, said several people involved in the discussions who were not authorized to discuss them publicly.

In the version of the bill introduced Thursday, the credit would be worth $300 annually and would be eliminated in five years.

For individuals and families, income-tax rates would go down. Presently, families have to pay a tax rate of 39.6 percent on income above $470,700. The House Republican bill would apply that tax rate only to income above $1 million for families. Rates further down the income spectrum would be cut as well.

“It’s an awesome tax cut,” said Rep. Bill Flores (R-Tex.). “I mean, it rebuilds working-class America — great for jobs, great for the economy. It’s going to be huge.”

The bill would seek to balance revenue lost to the rate cuts, however, by scrapping numerous tax breaks, some of which are used by tens of millions of Americans and have large-scale support.

The change to the mortgage interest deduction drew immediate attention Thursday. Under current tax law, Americans can deduct interest payments made on their first $1 million worth of home loans. The bill would allow existing mortgages to keep the current rules, but for new mortgages, home buyers would be able to deduct interest payments made only on their first $500,000 worth of loans.

The proposal to scale back allowing Americans to deduct state and local tax payments from their federal bill was particularly contentious during negotiations.

Republicans initially proposed eliminating that deduction entirely, but after a revolt from GOP lawmakers from New York, New Jersey and other high-tax states, the bill introduced Thursday contained a compromise.

The bill would allow people to deduct their local property taxes from their taxable income, but only up to the first $10,000.

Americans would no longer be able to deduct their medical expenses or property and casualty losses, according to a document outlining the plan.

Tax credits for electric cars would be eliminated.

Americans would no longer be able to deduct moving expenses or alimony payments.

Large college endowments would pay taxes on their income in a way that treats them more like private foundations.

Some deductions would be expanded. The bill would nearly double the standard deduction that many Americans claim on their taxes, raising it from $12,700 to $24,000 per family. But this benefit would be partially offset by the elimination of the personal exemption many Americans can claim, which can be large for families with multiple children.

The bill would also increase the child tax credit from $1,000 per child to $1,600. That credit would phase out once a family earns more than $230,000 a year, more than double the current $110,000 threshold.

The bill would add up to $1.5 trillion over 10 years to the national deficit, a move that contrasts with Republicans’ efforts under President Barack Obama to block legislation that could have expanded the deficit.

With legislation introduced, the GOP tax effort moves into a new and perilous phase, with party leaders working to unify their caucus behind the measure while individual lawmakers seek changes that match their ideologies or the preferences of their constituents and donors — all while Democrats pound the measure and attempt to rally the public against it.

Party leaders are setting an ambitious timeline, with the House and Senate hoping to pass legislation before Thanksgiving. A Senate bill has not yet been introduced.

The GOP effort will also be tested by what House Speaker Paul D. Ryan (R-Wis.) warned would be an “army of lobbyists” that would push Congress to make changes on behalf of their client industries and interest groups.

At least one major industry group, the National Association of Home Builders, announced days before the bill was released that the group would not support it, and others joined the attack within minutes of the measure’s unveiling. The National Federation of Independent Businesses said it was also not backing the effort, saying the legislation “leaves too many small businesses behind.”

Other business groups lauded the bill and are expected to try to help it win passage.

“In terms of a legislative text that addresses the core issues that must be addressed if we are going to grow our economy faster and raise wages for families, this is a home run,” said Neil Bradley, chief policy officer at the U.S. Chamber of Commerce.

Among lobbying groups, the change to the mortgage interest deduction has proved particularly contentious.

Some budget experts have said this change is necessary because otherwise the tax code essentially subsidizes the purchase of large homes in the wealthiest parts of the country. But housing groups have long fought off such a change, as the median home price in numerous parts of the country can be very high.

Jerry Howard, chief executive of the National Association of Home Builders, said his group would fight the bill “tooth and nail,” claiming that it could lead to a decline in home prices and a housing recession.

“This now is a direct assault on the American dream of homeownership,” he said in an interview.

Republicans said these changes are necessary to allow them to lower tax rates for all taxpayers. But many Democrats signaled opposition, vowing to fight its passage even while in the political minority.

“This bill is like a dead fish,” said Senate Minority Leader Charles E. Schumer (D-N.Y.). “The more it’s in sunlight, the more it stinks, and that’s what’s going to happen.”

The bill would not make changes to popular retirement plans such as 401(k)s, though. It also would not attempt to repeal provisions of the Affordable Care Act, though Republicans have said they might try to change the bill later for these purposes.

The legislative fight over the tax bill has become the Trump administration’s biggest political goal after failed attempts to repeal the ACA. Trump wants the legislation to pass the House and the Senate by the end of the year, though they must resolve numerous differences.

Other changes in the bill would be far-reaching. It would, for example, make changes to college savings programs and have new requirements for tax-exempt organizations such as churches and charities.

Republican supporters of the measure said Americans will see a number of changes if the tax plan is signed into law, but they argued that the final result would be a major tax cut.

“They’re interested in tax relief,” said Rep. Peter J. Roskam (R-Ill.). “They’re not particularly interested in the formula by which that relief gets to them.”

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House Republicans unveil tax reform plan

The Guardian  /  November 2, 2017

House Republicans put out long-awaited legislation that would slash the corporate tax rate and repeal inheritance taxes of multimillion-dollar estates

Donald Trump’s push for deep tax cuts reached a milestone on Thursday as his fellow Republicans in the House of Representatives unveiled a long-awaited plan which would benefit corporations and the wealthy but is less generous to the middle class.

The legislation would permanently lower the corporate tax rate to 20% from 35% and repeals the inheritance tax on multimillion-dollar estates in what would be the most sweeping change to the United States tax code in three decades.

It also would reduce the number of tax brackets from seven to four and nearly double the standard deduction that most Americans take on their tax returns to $12,000 for individuals and $24,000 for couples.

Although the Republicans had long described their effort as a push for “tax reform”, the bill entitled “the Tax Cuts and Jobs Act” was presented explicitly as a tax cut on Thursday.

The GOP speaker, Paul Ryan, hailed the plan as a “very important and special moment” for the country and claimed that it would reduce taxes for a family of four that makes $59,000 a year by $1,182, while fellow Republicans such as the majority whip, Steve Scalise, boasted that it would allow Americans to fill out their taxes on a postcard.

The White House put out a statement praising the legislation as providing “the rocket fuel our economy needs to soar higher than ever before”. Trump later said the legislation was “a big, beautiful Christmas present in the form of a tremendous tax cut” while speaking to reporters.

The sweeping tax cuts, long a priority of the Trump administration and congressional Republicans, faces major obstacles to passage as Democrats are almost uniformly skeptical of the plan and a number of Republicans have concerns.

Among the biggest red flags within the GOP are a provision to cap the deduction for state and local income taxes, which has faced skepticism from Republicans who represent high-tax states such as New York and New Jersey and the plan’s addition of $1.5tn to the national debt, which may raise the ire of deficit hawks. The bill would eliminate the tax deduction for state taxes and leave only a limited deduction for up to $10,000 in local property taxes.

The legislation is expected to face fierce opposition from realtors and the homebuilding industry as well over a provision to cap the deduction for mortgage interest on newly purchased homes at $500,000.

It also has already sparked opposition from the National Federation for Independent Business, a small business lobby. The group expressed concern that the corporate tax cuts on small businesses that pay taxes on pass-throughs via their owner’s individual tax returns were insufficient.

Democrats vowed to rally opposition to the tax bill using a similar approach to the one used to help stop a Republican healthcare plan, which fell one vote short in the Senate amid widespread resistance among the public.

House Democratic leader Nancy Pelosi panned the tax proposal a “shell game” and a “Ponzi scheme” and said the plan was analogous to a banquet for the wealthiest Americans, who tossed crumbs to middle-class families while they feasted.

According to a summary obtained by news organizations, the long-awaited tax plan would:

• Limit the widely used deduction for mortgage interest for newly purchased homes at up to $500,000, a sharp reduction from the current $1m cap.

• Limit the deductibility of local property taxes to $10,000.

• Eliminate the deduction for state income taxes.

• Nearly double the standard deduction used by most Americans to $12,000 for individuals and $24,000 for families.

• Slash the corporate tax rate from 35% to 20%.

• Repeal the inheritance taxes on multimillion-dollar estates.

• Increase the child tax credit from $1,000 to $1,600, though the $4,050 per child exemption would be repealed.

• Shrink the number of tax brackets from seven to four, with respective tax rates of 12%, 25%, 35% and 39.6%.

• Preserve a popular retirement account for middle-class Americans by leaving intact existing rules on 401(k) retirement accounts and the ability of Americans to contribute up to $18,000 into the accounts tax-free.

GOP leaders briefed rank-and-file lawmakers on the proposal on Thursday morning ahead of a formal rollout and a show of unity event at the White House with Donald Trump.

A major revamp of the tax code, the first in three decades, is a top legislative and political priority of Republicans.

But curtailing the state and local income tax deduction is sure to face opposition from Republicans in high-tax states.

“I view the elimination of the deduction as a geographic redistribution of wealth, picking winners and losers,” said Representative Lee Zeldin of New York. “I don’t want my home state to be a loser, and that really shouldn’t come as any surprise.” The New York Republican later came out against the bill.

The legislation is a longstanding goal for Capitol Hill Republicans who see a once-in-a-generation opportunity to clean up an inefficient, loophole-cluttered tax code.

The influential conservative representative Mark Meadows dismissed proposed retirement changes as a “non-starter”, adding “that’s what most of middle-income America uses as their nest egg”.

The plan calls for nearly doubling the standard deduction used by most average Americans to $12,000 for individuals and $24,000 for families, and increasing the per-child tax credit. On net, it could mean tax increases for many upper-middle-income families.

Slashing the corporate tax rate from 35% to 20% was a key demand of Trump’s. Repealing the inheritance taxes on multi-million dollar estates would also represent a big break for the wealthy.

Republicans and Trump argue that sharply cutting tax rates for businesses improves US economic competitiveness, but the possibility of letting the lower corporate rates expire is rankling some longtime advocates who say the uncertainty could limit its boost to the economy.

The ambitious timetable calls for passing the complex measure in the House by Thanksgiving and House Republicans have already announced a markup hearing for the bill on Monday.

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House tax reform plan would kill $7,500 EV credit, phase out estate tax

Bloomberg  /  November 2, 2017

WASHINGTON -- Tesla, General Motors and other major carmakers pushing to boost U.S. electric car sales were dealt a blow by House Republicans who on Thursday proposed eliminating a $7,500 per vehicle tax credit that has helped stoke early demand for the still small segment of the U.S. auto market.

If adopted, the repeal would take effect after the 2017 tax year, according to a summary of the bill released Thursday by the House Ways and Means Committee as part of a sweeping overhaul of the U.S. tax code that would eliminate some deductions and cut the corporate tax rate to 20 percent. The Senate is crafting its own version.

Automakers from Detroit to Yokohama are betting big on an electric future with plans to spend billions of dollars on new pure-electric models to be rolled out in the coming years despite limited sales to date. Availability of the credit has been capped at the first 200,000 qualifying vehicles sold by each manufacturer. No automaker has reached that cap yet.

“That will stop any electric vehicle market in the U.S., apart from sales of the highly expensive Tesla Model S,” said Xavier Mosquet, senior partner at consultant Boston Consulting Group, who authored a study on the growth of battery powered vehicles. “There’s no Tesla 3, no Bolt, no Leaf in a market without incentives.”

Phasing out estate tax

Separately, the proposed overhaul also calls for phasing out the estate tax -- a 40 percent levy applied to estates worth more than $5.49 million dollars for individuals or $10.98 million dollars for couples.

Repealing it has been a priority for the nation’s car dealers. The National Automobile Dealers Association has argued that the tax hurts dealerships, which cannot easily liquidate assets to pay the tax. The NADA also contends a tax liability makes it less likely a business will be passed on to the next generation.

Tesla trouble 

A premature end to the EV credit could have outsized impact for Tesla, which is striving to scale up production of its least expensive electric car, the $35,000 Model 3 sedan. The company has said it has hundreds of thousands of would-be buyers holding reservations for the vehicle.

Tesla shares extended declines after Bloomberg reported on the proposed elimination, plunging as much as 8.9 percent to $292.63, the lowest intraday since May 4, before rebounding back to $299.26 a share. The company declined to comment on the GOP proposal. 

Eliminating the credit will also impact other carmakers offering electric vehicles such as GM and Nissan Motor Co., which according to the Alliance of Automobile Manufacturers, collectively offer more than 30 EVs in the U.S. market. Carmakers are under pressure to sell vehicles in higher volumes each year under an electric car sales mandate administered by regulators in California. Ten other states also follow that policy.

That puts the auto industry "in the middle between contradictory government policies," Alliance spokeswoman Gloria Bergquist said in a statement.

"There is no question that the elimination of the federal electric vehicle tax credit will impact the choices of prospective buyers and make the electric vehicle mandate in 10 states -- about a third of the market -- even more difficult to meet,"said Bergquist, whose trade association represents a dozen automakers including GM, Ford Motor Co. and Volkswagen AG. 

GM vowed to fight, saying the credits are "an important customer benefit that can help accelerate the acceptance of electric vehicles."

Ford didn’t immediately respond to a request for comment. Nissan declined to comment.

"We are extremely disappointed in H.R. 1’s proposed repeal of the incentive for plug-in electric drive vehicles," Genevieve Cullen, president of the Electric Drive Transportation Association, said in a statement. "Congress should maintain the plug-in electric drive tax credit, which is promoting industry investment and creating jobs in the U.S., while helping consumers save on energy costs and enhancing public health."

EV sales held back

EV sales have been held back by a lack of variety of electric models, high sticker prices fueled by expensive battery packs and limited driving ranges compared to gasoline-fueled vehicles. Yet automakers expect those challenges to ease in the coming years.

"The EV tax credit repeal would cede U.S. leadership in clean vehicles, putting our companies at a competitive disadvantage and threatening jobs while costing drivers more at the pump and increasing pollution," Luke Tonachel, director of the Natural Resources Defense Council’s Clean Vehicles and Fuels Project, said in a statement.

Former President Barack Obama repeatedly proposed hiking the tax credit for electric vehicles to $10,000 and converting it to a point-of-sale rebate, but Congress failed to approve the measure.

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US tax reform targets avoidance by multinationals

The Financial Times  /  November 3, 2017

Excise levy would crack down on ‘inversion’ deals and foreign groups with US affiliates

Foreign multinationals have emerged as the target of a tax avoidance crackdown embedded in radical reforms unveiled by Republicans this week as they seek to stop companies from spiriting profits out of the US.

Company lobbyists who initially cheered the plan to cut the corporate tax rate from 35 per cent to 20 per cent were on Friday fretting over an anti-avoidance provision they said could do collateral damage to global supply chains.

Their concerns underscore the formidable challenges confronting Republicans as they try to overhaul the tax code for the first time since 1986 in the face of corporate lobbying, budget constraints and an impatient President Donald Trump.

Gary Cohn, director of Mr Trump’s National Economic Council, said on Friday the White House hoped to see the House of Representatives vote on the tax plan the week after next, when Mr Trump returns from a trip to Asia.

The anti-avoidance proposal would hurt foreign-owned multinationals with American affiliates as well as US companies that used “inversion” deals to move their head offices overseas, said Bret Wells, a tax expert at the University of Houston.

Crafted with an “America first” tinge, it would impose a 20 per cent “excise tax” on cross-border payments between affiliates of the same company, which are tax deductible and made for materials, services and intellectual property royalties.

“Yes, we have a new design to stop inbound, unwarranted deductions of expenses,” said Kevin Brady, the chief Republican tax writer in the House of Representatives, in response to a question from the Financial Times.

Mr Brady, chairman of the House ways and means committee, has been pushing for ways to end perceived advantages he says the current tax code gives to foreign companies versus US corporations.

Mr Wells, who recommended similar measures to Congress at a hearing last month, said: “It’s a fairly expansive provision in the way it’s contemplated.” He estimated that at present some companies could use tax-deductible payments between affiliates to shift as much as 30-40 per cent of their profits out of the US.

Lobbyists dispute the characterisation of multinationals as tax avoiders, arguing that such payments, also known as related-party transactions, are a legitimate and necessary part of internal supply chains that span the globe.

Nancy McLernon, president of OFII, a trade group for foreign companies in the US, said: “We’ve got to be very careful as we craft major tax legislation that might disproportionately impact international companies because US companies can be hit by retaliatory measures as a response.”

France is pushing for the EU to agree a new turnover tax on US tech groups to make it impossible for companies such as Apple and Google to cut their tax bills by moving profits between countries.

The Republican excise tax would have a limited effect on US tech companies. Although they use IP royalties to shift profits out of the US, their ability to do so is constrained by a provision of existing law that does not apply to foreign-owned companies.

One lobbyist said the excise tax would affect other US businesses, arguing it would hit carmakers importing components from their own factories in Mexico and retailers bringing in clothing from affiliates in China.

He said it recalled an earlier Brady proposal for a levy on imports — a border adjustment tax — which was killed by an outcry from importers. “In my view this is a border tax-lite proposal because you are taxing material being brought in to be sold in the US,” the lobbyist said.

The excise tax would raise $155bn over 10 years, according to Congress’s joint committee on taxation, curtailing what Republicans call the “erosion” of the US tax base and helping to pay for the sharp cut in the headline corporate tax rate.

A summary of the excise tax proposal from Mr Brady’s committee says “current law incentivises and subsidises the shift of American jobs overseas because additional functions performed abroad allow for greater deductible payments from US corporations to their foreign affiliates”.

It continues: “The provision would eliminate the US tax benefit afforded to multinational companies . . . by imposing full US tax on those profits irrespective of where they are booked.”

Mr Brady said the excise tax was “one of the areas we invite the most feedback in, because it’s a combination of some traditional ideas that have been talked about in the past with some new approaches”.

The Republican bill, which House speaker Paul Ryan says will also save money for middle class families, is due to be amended by lawmakers next week before a vote in the House. If it passes, it will then go to the Senate, where members are likely to want to make their own revisions.

OFII and other trade groups said they were still evaluating the impact of the bill as a whole.

Related reading - http://www.bigmacktrucks.com/index.php?/topic/42799-white-house-refuses-to-step-on-pfizer-tax-dodge/?hl=inversions

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Dueling Republican tax plans advance in Congress

Reuters  /  November 9, 2017

U.S. Senate Republicans unveiled a tax plan on Thursday that differed from the House of Representatives' version on several key fronts, including how they treat the corporate tax rate, the tax deduction for state and local taxes, and the estate tax.

Complicating a Republican push for the biggest overhaul of U.S. tax law since the 1980s, senators said that, like the House, they wanted to slash the corporate tax rate to 20 percent from 35 percent, but in 2019, not right away.

The House was set to vote on its measure next week after its tax-writing Ways and Means Committee approved the legislation on Thursday along party lines, with Democrats united in opposition.

The Senate's timetable was less clear, with a formal bill yet to be drafted in that chamber, where Republicans have a much smaller majority and a narrower path to winning approval for any legislation, let alone one as contentious as a tax package.

Republicans reiterated their goal of enacting final legislation by the end of the year.

Stocks, which have rallied this year on hopes for business tax cuts, declined as details of the two plans emerged. Investors worried about divergence between the House and Senate and the Senate's proposed corporate tax rate cut delay.

In a broad sense, the House and Senate plans matched up in calling for deep tax cuts for high-earners and businesses and for a dramatic reshaping of how the United States taxes multinational corporations, big winners if the plans become law.

Democrats, largely ignored in the closed-door drafting of both bills, have condemned them as giveaways to the rich and businesses that will do little for ordinary Americans.

White House economic adviser Gary Cohn handed them ammunition, saying: "The most excited group out there are big CEOs, about our tax plan."

The White House issued statements that praised the Ways and Means Committee and the tax-writing Senate Finance Committee and expressed confidence that further progress would be made.

Election Wake-Up

Victories by Democrats in state and local elections in Virginia, New Jersey and elsewhere on Tuesday increased the urgency for Republicans, who control both the White House and Congress, to make good on their campaign promises on taxes.

"We're going to get this over the finish line," House Speaker Paul Ryan said, adding the House would not just approve whatever the Senate passes and that a House-Senate conference committee would be needed to reconcile differences.

One big disagreement between the two chambers concerns a deduction now available to Americans for state and local taxes (SALT), a keen concern for taxpayers in high-tax, typically Democratic-leaning states such as California, New York, New Jersey, Connecticut and Massachusetts.

The Senate plan would entirely repeal the SALT deduction. The House bill would repeal it only for state and local income and sales tax, but preserve it for property tax up to $10,000.

Estate Tax

Another point of friction is the estate tax on inheritances. The Senate would leave it on the books, but increase exemptions so fewer people pay. The House would increase exemptions, but repeal the tax over a six-year period.

The Senate calls for keeping the existing seven tax brackets and cutting the top tax rate for the highest-earning taxpayers to 38.5 percent from 39.6 percent. The House wants to reduce the number of brackets, but leave the 39.6 percent top rate alone.

The Senate would close a loophole that allows private-equity fund managers and other wealthy Wall Street financiers to pay the capital gains tax rate on "carried interest" income, instead of the higher wage rate. The House plan leaves the tax break in place, but further restricts who can claim it.

In another divide that will need bridging, both chambers call for slapping a mandatory tax on $2.6 trillion in foreign profits being held offshore by U.S. multi-nationals. The Senate wants that tax to be 12 percent for cash and liquid assets, and 5 percent for non-liquid assets. The House amended its bill on Thursday, going to 14 percent and 7 percent, respectively.

A late revision to the House bill exempted vehicle dealers from new limits on interest deductibility on inventories, responding to car dealers' concerns about an earlier draft.

Such tweaks to both bills were expected to continue in days ahead as lobbyists descend on Capitol Hill seeking favors.

"At every stage, the GOP tax scam grows more generous for multi-national corporations and more destructive toward American workers and middle class families," California's Nancy Pelosi, the Democratic leader in the House, said in a statement.

Both bills would add $1.5 trillion over 10 years to the budget deficit and national debt, a problem that not long ago would have drawn Republican criticism.

Pelosi said: "It turns out that deficit hawks are extinct in the Republican Party."

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Senate Plan Could Increase Taxes on Some Middle-Class Workers

The New York Times  /  November 10, 2017

WASHINGTON — Mitch McConnell, the Senate majority leader, acknowledged on Friday that the Republican tax plan might result in a tax hike for some working Americans, saying he “misspoke” days earlier when he said that “nobody in the middle class is going to get a tax increase” under the Senate bill.

“I misspoke on that,” Mr. McConnell, a Kentucky Republican, said in an interview on Friday with The New York Times. “You can’t guarantee that absolutely no one sees a tax increase, but what we are doing is targeting levels of income and looking at the average in those levels and the average will be tax relief for the average taxpayer in each of those segments.”

The Senate bill unveiled on Thursday would raise taxes on millions of middle-class families, according to a preliminary New York Times analysis. The plan would also disproportionately benefit high earners and corporations. Still, middle-class earners would fare better under the Senate proposal than its counterpart in the House, the analysis found.

The Senate Finance Committee bill would, on average, cut taxes for people at every income level. But, as Mr. McConnell alluded to in his revised remarks, those benefits would vary widely within income brackets, depending on the specific circumstances of individuals and households, and many would pay more than under existing rules.

Republican lawmakers have been in a dash to devise — and pass — a tax overhaul that would mark their most significant achievement since taking control of Congress. President Trump and Republican leaders have outlined two main objectives for the rewrite: cutting taxes for American businesses and for the middle class. The legislation reduces tax rates on individuals and businesses, while eliminating some tax breaks to make up for lost revenues. It is meant to accelerate economic growth and increase wages for workers.

Both the House and Senate bills would cut the corporate tax rate to 20 percent from 35 percent and provide business tax benefits, such as the ability to immediately expense purchases of equipment.

The Times analysis, using the open-source software TaxBrain, found that roughly one-quarter of families in the middle class would see their taxes increase in 2018, by about $1,000 on average. By 2026, the share seeing an increase would rise slightly, to about one-third, and the average increase would rise to about $1,600.

For the majority of middle-class families that receive a tax cut, the average savings would be about $1,300 in 2018 and $1,700 in 2026.

Who Will See Tax Cuts From Senate Plan?

Under the Senate bill, four out of five high earners would receive tax cuts in 2018.

Note: Includes all households, not adjusted for household size.

The Times analysis defines the middle class broadly as those earning between two-thirds and twice the median household income, or about $50,000 to $160,000 per year for a family of three. To focus on families, the analysis excluded individual filers and households headed by people 65 or older and is adjusted for the size of each household.

Under the House bill, The Times has found, about half of middle-class families would pay more in taxes in 2026.

The analysis did not seek to calculate how workers might benefit from a steep cut in the corporate tax rate, which both the Senate and House bills would reduce to 20 percent from a top rate of 35 percent today, or project how the bills might increase economic growth and, with it, Americans’ wages.

On Friday, the independent Tax Foundation released an analysis of the plan’s growth effects. It projected that the Senate bill would increase gross domestic product by 3.7 percent over the next decade and raise wages by 2.9 percent across the economy.

For taxpayers earning more than $1 million a year, the Senate bill offers a more limited upside and downside than the House bill.

The Senate bill is less likely than the House bill to yield tax increases for high-income Americans, in part because it cuts the top marginal personal tax rate, while the House bill creates a so-called “bubble rate” that would actually raise taxes on many high-salaried workers.

The Senate measure would also produce a smaller average tax windfall for high earners than the House version, in part by offering less generous benefits for owners of businesses known as pass-throughs, which are not organized as corporations.

Under the Senate plan, “Americans are especially likely to face a tax increase if they have a smaller family, have mostly wage income instead of investment income, or claim some of the many deductions that the bill repeals, like those for state and local taxes and employee business expenses,” said Lily Batchelder, a professor and tax specialist at New York University Law School, who worked on economic policy in the Obama administration. “They are increasing taxes on many in the middle class, while concentrating their tax cuts on the wealthy.”

The Senate bill appears much better for the very wealthy than it is for the somewhat wealthy. About half of families earning between two and three times the median income — or about $160,000 to $240,000 for a family of three — would pay more in 2018 than under existing law. But among the richest families, those earning more than about $500,000 for a family of three, nearly 90 percent would get a tax cut.

The findings come with an important caveat: The Senate bill, as written, appears unable to muster the 60 votes needed to avoid a Democratic filibuster, meaning Republicans will need to amend it to comply with the budget reconciliation rules and allow permit passage by a simple majority. Those changes could likely include putting expiration dates on some of the bill’s major provisions, which could make the final version of the bill look less favorable to the middle class, particularly in later years.

The Times’s figures are based on an analysis of Census Bureau data using a tax model from the OpenSourcePolicyCenter, a Washington research organization affiliated with the right-leaning American Enterprise Institute. Because the analysis is based on publicly available data, not actual tax records, it may not capture all the intricacies of Americans’ household finances.

The Senate bill differs sharply from the House version in its approach to cutting taxes on businesses. But when it comes to taxes on individuals and families, the bills are more similar than different. Both would double the standard deduction while eliminating a raft of deductions and credits. Both would make the child tax credit more generous. Both would restructure federal income tax brackets to impose lower marginal tax rates at most income levels, although the Senate approach, unlike the House version, doesn’t eliminate two brackets entirely.

The Senate bill includes features that would make its plan more favorable to the middle class. It preserves some popular tax deductions and credits that the House bill initially would have eliminated, and it makes the child tax credit somewhat more generous and widely available. On the other hand, the Senate bill, unlike the House version, would eliminate the deduction for property taxes, which could lead to higher federal taxes for homeowners in areas with high property tax rates or expensive housing markets.

Aparna Mathur, an economist at the American Enterprise Institute, said senators could improve the bill with further changes, such as expanding the earned-income tax credit and extending the benefits of the child tax credit to more low-income taxpayers. “We clearly need to do more to help the lowest-income families,” she said. “At the same time, we can engage in more base broadening for the highest-income households, perhaps by eliminating and not just capping the mortgage-interest deduction.”

The Times analysis found that roughly one-fifth of the Senate bill’s cuts in 2018 would go to families and individuals earning $1 million or more, and close to half would go to people earning at least $200,000. Between 10 million and 15 million taxpayers earning less than $100,000 a year would pay more than under existing law.

Families earning more than $1 million a year would see their after-tax income rise by about 1.7 percent in 2018 compared with what they would make under current law, nearly triple the gains enjoyed by those earning less than $200,000.

Over all, the Senate bill would cut individual income taxes by about $30 billion in 2018, and by $900 billion over the next decade, according to Congress’s nonpartisan Joint Committee on Taxation. And most people in all income groups would see a tax cut, although the cuts would be modest for most lower earners.

[kscarbel2]

Here’s an idea, Republicans: Repeal and replace the tax code

George Will, The Washington Post  /  November 10, 2017

The Republicans’ tax bill would somewhat improve the existing revenue system that once caused Mitch Daniels (former head of the Office of Management and Budget, former Indiana governor) to say: Wouldn’t it be nice to have a tax code that looked as though it had been designed on purpose? Today’s bill, which is 429 pages and is apt to grow, is an implausible instrument of simplification. And it would worsen the tax code’s already substantial contribution to “moral hazard.”

Economists use that phrase to denote circumstances in which incentives are for perverse behavior. Today’s tax code is such a circumstance, and the Republican bill would exacerbate this by expanding the $1,000 child credit to $1,600 with an additional $300 “family credit” for each parent and non-child dependent, and by doubling the standard deduction to $12,000 for individuals and $24,000 for married couples. These measures would increase the number of persons not paying income taxes and would further decrease the percentage of income tax revenues paid by low-income earners.

Already 62 percent of American households pay more in payroll taxes than in income taxes. The bottom 50 percent of earners supply less than 3 percent of income-tax revenues. Forty-five percent of American households pay no income tax, either because they earn too little or because they qualify for enough exemptions and credits to erase their liability. Sixty percent pay nothing or less than 5 percent of their income. Forty percent of earners are net recipients from the income tax because they qualify for refundable tax credits. All this means that an already large — and, if the Republican bill passes, soon to be larger — American majority has a vanishingly small incentive to restrain the growth of a government that they are not paying for through its largest revenue source.

These facts might be the results of defensible tax and social policies. They should, however, be discomfiting to those remaining conservatives — they are on the endangered species list — who dispute Dick Cheney’s notion that “Reagan proved deficits don’t matter.” Deficits matter for their political as well as — actually, even more than — their economic effects: Deficits make big government cheap, enabling the political class to charge taxpayers rather less than $1 for every $1 of government benefits dispensed. When the Bush-Cheney administration managed the last large tax cut, the publicly held national debt was 33 percent of gross domestic product. Today it is 75 percent.

Today’s Republican bill, drafted in the aftermath of the failure to repeal and replace Obamacare, is supposed to demonstrate to the party’s Trumpian base that congressional majorities matter and must be extended. Rep. Mark Meadows (R-N.C.), chairman of the conservative House Freedom Caucus, has said (to USA Today): “If we had a whole bunch of wins on major items up to this point, would we perhaps be a little bit more deliberate in our negotiations? I think the answer is yes.” But the facts about participation in the income tax mean that the bill is unlikely to assuage the injured feelings of core Trump supporters, understood as downscale white working-class voters who supposedly are seething because they are not benefiting enough from burdensome government. They might have valid grievances, but not ones that can be addressed by income-tax rate reductions for individuals. Payroll tax reductions would be another matter.

And all individual earners will benefit to some extent from cutting the corporate rate from 35 percent to 20 percent. The incidence of corporate taxation — who actually pays it — is fiercely debated by economists, a remarkably cocksure cohort with strikingly divergent views about the degree to which corporate taxation depresses the wages of the corporations’ workers, curtails shareholders’ dividends and is passed on to consumers in the costs of corporations’ products. Suffice it to say that corporations do not pay taxes; they collect taxes. Uncertainty about the incidence of corporate taxation is one reason the Republican bill’s corporate tax rate is 20 points too high.

This year’s best tax bill, which Rep. Bob Goodlatte (R-Va.) has introduced six times since 2006, is four pages long and contains fewer words (411) than the new Republican bill has pages. It could be titled “The ‘What You Wished For, Mitch Daniels’ Act.” It is titled, with almost unprecedented accuracy, the “Tax Code Termination Act.” It would nullify the existing 4 million-word code as of Dec. 31, 2021, and require that by July 4 of that year it must be replaced by a new one, which would necessarily be one designed on purpose.

[kscarbel2]

Senate Passes Sweeping Revision of U.S. Tax Code

The Wall Street Journal  /  December 2, 2017

Republican-backed plan lowers corporate rate to 20% and reduces individual rates

WASHINGTON—The Senate passed sweeping revisions to the U.S. tax code past midnight Saturday after Republicans navigated a thicket of internal divisions over deficits and other issues to place their imprint on the economy.

The bill, which included about $1.4 trillion in tax cuts, would lower the corporate rate to 20% from 35%, reshape international business tax rules and temporarily lower individual taxes. It also touched other Republican goals, including opening the Arctic National Wildlife Refuge to oil drilling and repealing the mandate that individuals purchase health insurance, which would punch a sizable hole in the 2010 Affordable Care Act. But some objectives, such as repealing the alternative minimum tax, fell by the wayside in last-minute wrangling.

“In the end it all came together and we’re pretty excited about what we’ve been able to accomplish for the American people,” Senate Majority Leader Mitch McConnell (R., Ky.) said in an interview Friday. “We’ve got a corporate rate at 20% that we think makes us competitive in the world again and provided substantial middle-income tax relief.”

The bill passed 51-49, with all but one Republican voting for it and all Democrats voting against. The sole Republican, Sen. Bob Corker of Tennessee, stated his opposition before the vote, citing worries it would expand budget deficits.

The bill’s ultimate passage would mark a legislative victory for President Donald Trump and his fellow Republicans. Mr. Trump has made the tax overhaul a centerpiece of his economic policy goals, focusing on a rewrite of business taxes, which he has argued make the U.S. uncompetitive internationally. The bill could also give lawmakers something to campaign on in the 2018 midterm elections.

Democrats blasted the bill, calling it an unacceptable giveaway to corporations and the wealthy. They also criticized last-minute Republican adjustments and waved handwritten amendments around the Senate floor to show how hastily the changes were being made.

“A flurry of last-minute changes will stuff even more money into the pockets of the wealthy and the biggest corporations while raising taxes on millions in the middle class,” Sen. Chuck Schumer of New York, the chamber’s Democratic leader, said.

The House and Senate still need to reconcile competing versions of the tax plan, something GOP leaders hope to do by Christmas. The House and Senate bills overlap in many ways, and lawmakers expressed optimism about getting a final deal done.

“The bills are not all that different,” Mr. McConnell said. “We tried to move ours somewhat in the House direction.”

Senate Republicans called their bill an economic booster shot, their best chance to create faster sustained growth and higher wages. But it comes with risks. Congress’s own nonpartisan analysis found that the economic benefits would be modest and fade over time.

The Joint Committee on Taxation estimated that the tax cuts wouldn’t pay for themselves, as Republicans promised. Instead the analysis found they would increase deficits by $1 trillion over a decade, even after accounting for economic growth.

Investors, for now, are more excited about the prospect of lower corporate taxes than about the risks associated with larger government deficits. The Dow Jones Industrial Average rose 673.60 points for the week, or 2.9%, to 24231.59. Yields on 10-year Treasury notes, which might be expected to rise if bond investors were worried about deficits, remain comfortably low, below 2.5%.

Senators began voting on amendments late Friday night and that continued into early Saturday. They defeated, 29-71, an attempt by Sen. Marco Rubio (R., Fla.) and Mike Lee (R., Utah) to expand the child tax credit for low-income families, which would have been paid for by setting the corporate tax rate at 20.94%.

Vice President Mike Pence broke a tie in favor of a proposal from Sen. Ted Cruz (R., Texas) to allow the use of 529 savings accounts to pay for elementary and secondary school costs, including private-school tuition.

Saturday’s vote came after a week of long hours and frantic rewriting and deal-making. The GOP tax effort wobbled late Thursday after the Joint Committee on Taxation analysis raised the concerns of budget hawks about deficits. An attempt to add deficit countermeasures in the bill failed to clear parliamentary rules.

Mr. McConnell and his team salvaged the measure with a series of last-minute deals to sway wavering senators.

Sens. Steve Daines (R., Mont.) and Ron Johnson (R., Wis.) won bigger tax breaks for pass-through businesses such as partnerships and S corporations. Sen. Jeff Flake (R., Ariz.) secured more aggressive depreciation rules to encourage business investment after 2022.

Sen. Susan Collins (R., Maine) scored a $10,000 deduction for property taxes, an expanded but temporary deduction for people with large medical expenses, and a promise of future bipartisan health-care legislation to mitigate the effects of repealing the individual health-insurance mandate.

“This bill will provide much-needed tax relief and simplification for lower- and middle-income families, while spurring the creation of good jobs and greater economic growth,” Ms. Collins said.

To help pay for some of those changes, Republicans increased a new tax on companies’ stockpiled foreign profits to 14.5% for cash and 7.5% for illiquid assets, from 10% and 5% in a previous version.

Senate Republicans abandoned other goals. They preserved the alternative minimum tax instead of repealing it. They backed off a plan to abolish the estate tax. They retained seven tax brackets instead of collapsing them into three as planned. And after years of warning about the rising national debt and promising a tax overhaul that would be revenue-neutral, they chose to proceed despite warnings the measure would add to deficits in the long run.

Lawmakers released the final changes—moving around hundreds of billions of dollars—a few hours before the last vote, and there was no updated analysis of the bill’s impact on taxpayers and the economy as Republicans moved toward voting on it.

“The Republicans have managed to take a bad bill and make it worse. It was chock-full of special-interest giveaways before tonight,” Mr. Schumer said.

The bill would overhaul much of the U.S. tax system in ways that tax experts are only beginning to understand.

Mr. Trump and some Republicans set the 20% corporate tax rate as an immovable objective and despite some occasional doubts, the GOP stuck with it. That is a win for domestic retailers and manufacturers who have spent years building the political case for a lower tax rate.

Pass-through firms, which pay their business taxes through individual returns rather than corporate returns, won major concessions. They would get a 23% deduction from individual rates. More than half of U.S. business income goes to pass-throughs, and more than half of that goes to the top 1% of households.

Tax analysts said this deduction opens new and unprecedented avenues for tax avoidance, with individuals likely seeking to declare as much of their income as possible as lower-taxed business profits.

Even in a bill that provides sizable tax cuts to many, some taxpayers are set to lose. The bill would prevent individuals from deducting state and local income taxes. That is likely to raise federal taxes on upper-middle-class wage earners in high-tax states, such as California, Connecticut, Maryland, New Jersey and New York. They are all represented by Democrats in the Senate.

The standard deduction would be nearly doubled and the child tax credit would rise, while personal exemptions would be repealed. For many households, that combination would modestly increase the amount of earnings that aren’t subject to income tax.

The bill also would push millions of households out of itemizing deductions. That would reduce the incentive to deduct mortgage interest and charitable contributions. But nonprofits, home builders and real-estate agents were unable to sway Republicans to reverse course on the measure.

Debt-reliant businesses would lose, too, under a provision that limits interest deductions to 30% of income.

Republicans said those changes were necessary to lower the rate and make other changes that would encourage investment in the U.S.

“The reforms that we make in this bill allow American companies to compete and win against those other countries around the world,” Sen. John Thune (R., S.D.) said.

[kscarbel2]

Senate passes big cuts for richest Americans

The Guardian  / December 2, 2017

Bill passed in early hours of Saturday will benefit big businesses and the wealthy, and give Donald Trump his first major legislative victory

Senate Republicans have passed the most sweeping overhaul of the US tax code in three decades, a significant step that moves Donald Trump closer to achieving the first major legislative victory of his presidency.

The Senate passed their tax plan in a 51-49 vote early Saturday morning after a frantic rewrite of the legislation. Senator Bob Corker was the sole Republican to vote against the bill, which would bestow huge benefits on US corporations and the wealthiest Americans.

The House of Representatives passed its own tax reform bill last month and now a final bill will be passed to Trump.

“We think this is a great day for the country,” Senate Majority Leader Mitch McConnell said, at a celebratory press conference after the vote.

Trump tweeted his thanks to McConnell and said he was looking forward to signing the bill before Christmas.

The vote marked a significant feat for Republicans, who suffered a series of embarrassing blows earlier this year by failing on multiple occasions to repeal and replace the Affordable Care Act amid opposition within their own party. Trump and Republicans in Washington subsequently staked their political fortunes on the hope that tax reform would not suffer the same fate as healthcare.

House speaker Paul Ryan said: “For the first time since 1986, both the House and the Senate have passed a major overhaul of our nation’s tax code. Now we will move quickly to a conference committee so we can get a final bill to President Trump’s desk.”

The rush to pass the bill before the end of the week sparked outcry from Democrats, who said it would be impossible to fully digest the legislation before voting began.

Lawmakers receieved the nearly 500-page bill, some of it handwritten, hours before they voted on the sprawling tax plan that will affect nearly every US business and taxpayer.

“I defy any member of the Senate to stand here, take an oath that they have read this and understand what in the world it means to businesses and families and individuals,” said Senator Dick Durbin, the minority whip from Illinois, holding up page notes scribbled in the margin.

After closing debate, the Senate began the tedious process of a vote-a-rama, in which senators can offer an endless series of amendments. At midnight, vice-president Mike Pence arrived in the chamber to break a tie on an amendment offered by senator Ted Cruz that allows parents to start savings accounts to fund tuition at private and religious K-12 schools known as 529 plans. The provision prevailed.

Earlier on Friday, McConnell emerged, smiling, from a meeting with colleagues, to announce that his party had secured the votes necessary to pass the legislation.

“We have the votes,” McConnell told reporters on his way to the Senate floor. He said a final vote was expected later in the day.

The House of Representatives passed its own tax reform legislation earlier this month. When the Senate passes its version, the two bills will be reconciled, presenting further hurdles in the coming weeks.

Republicans have contended the $1.4tn package of tax cuts enclosed in their plan would in effect pay for itself through growth. That belief, however, was complicated by a series of independent projections that found it would not.

The nonpartisan joint committee on taxation projected that the plan would add $1tn to the federal deficit over the next 10 years – even after factoring in the economic growth the bill is projected to generate. And on Friday, The independent TaxPolicyCenter released similar findings, predicting that the Senate bill would add $1.2tn to the federal deficit over the next decade after accounting for increased economic growth.

McConnell parried criticism that the bill would not offset the costs, predicting that the plan would produce much larger growth than the analyses have found.

“I’m totally confident this is a revenue-neutral bill,” McConnell told reporters. “I think this will be a revenue producer.”

Senate Republicans are using a vehicle known as “budget reconciliation” to pass the tax plan using a simple-majority vote, leaving them room for only two defections. Faced with competing concerns, leadership spent the night locked in negotiations with members over the legislation’s impact on the federal deficit, healthcare and certain businesses.

On Friday morning, Senate Republicans regained momentum after three key holdouts announced their support for the tax overhaul in exchange for a series of changes to the legislation. Senator Susan Collins, a Maine Republican, said she would vote in favor of the legislation, ensuring that Pence would not be needed to break a tie.

Republican senators Corker and Jeff Flake had sought to extract an agreement that would scale back some of the tax cuts in the event the economic growth projections were not met. On Thursday, they unexpectedly held court on the Senate floor, after learning that a mechanism they created to limit the impact on the national debt was not compliant with the Senate’s budget rules. The tense show-down led Republicans scrambling to find a way to offset the deficit by hundreds of billions of dollars.

But ultimately, the plans were rejected by Senate leadership, Cruz told reporters, after he and a number of others objected.

“That proposal did not carry the day,” Cruz said. “Those $350bn in tax increases are not in the bill ... and larding the bill up with new tax increases would have been going the wrong direction.”

Flake on Friday announced that he would support the bill despite his concerns, saying in a statement that he had secured two priorities: the elimination of an $85bn “expensing budget gimmick” and a “firm commitment” from the leadership and administration that Congress would enact permanent protections for immigrants brought to the country illegally as children. Meanwhile, Corker said he would not support the plan.

“This is yet another tough vote,” Corker said in a statement.

“But at the end of the day, I am not able to cast aside my fiscal concerns and vote for legislation that I believe, based on the information I currently have, could deepen the debt burden on future generations,” he added.

Key to winning over the Republican senators Ron Johnson of Wisconsin and Steve Daines of Montana was an agreement to expand tax cuts for millions of businesses known as “pass-through entities”. The plan will now allow owners of these companies to deduct 23% of their business income, up 17.4%.

Democrats, who were excluded from the process of drafting the tax plan, have remained united in their opposition, attacking the legislation as a giveaway to corporate America and the wealthy.

“In the waning hours, this bill is tilting further towards businesses and away from families,” said Chuck Schumer, the Senate minority leader, in a floor speech on Friday. “Every time the choice is between corporations and families, the Republicans choose corporations.”

Trump has called for a tax bill to reach his desk by the end of the year, vowing to deliver a “big, beautiful Christmas present” to Americans.

“A vote to cut taxes is a vote to put America first again. We want to do that,” Trump said on Wednesday.

[kscarbel2]

Auto sector escapes big hits in Senate tax bill

Eric Kulisch, Automotive News  /  December 4, 2017

WASHINGTON -- The auto industry fared better, on balance, in the tax bill that narrowly passed the Senate on Saturday than in the House version. Now the industry will try to hold onto those gains, or improve on them, as both chambers convene to craft a unified bill.

Dealerships won a reprieve when last-minute language was inserted in the Senate legislation to preserve full deductibility of floorplan interest -- mirroring the House measure.

The Senate is seeking to limit business interest deductibility to 30 percent of adjustable taxable income, and the original proposal would have included the traditional write-off of interest expense on vehicle inventories.

Industry officials say retailers heavily rely on interest-only loans to buy products they can showcase to customers. The specialized financing and interest deduction enables dealerships, often small businesses, to keep down the cost of holding inventory.

Family-owned franchise dealerships also would benefit from how the House treats the estate tax, which is levied on property when it transfers to heirs after an owner's death. Both chambers would immediately double the current exclusion, but the House would repeal the estate tax after 2014.

For 2017, an individual can leave $5.49 million ($11 million for a married couple) to heirs and pay no federal estate tax, according to the IRS.

Aside from industry-specific provisions, the private sector stands to win big with corporate tax rates set to be reduced from 35 to 20 percent, with the change going into effect immediately under the House plan and in 2019 under the Senate version.

Republican Sens. Ron Johnson of Wisconsin and Steve Daines of Montana held out until they got better terms for small business owners compared to large companies. Single proprietorships and other S corporations don't have income taxed at the corporate level but pass it through to themselves and pay the tax on their individual returns.

Both proposals would lower the tax rate on individuals and then set thresholds on how much income would be treated as pass-through. The Senate bill allows a deduction for 23 percent of qualifying "pass-through" income, while the House bill caps the maximum rate at 25 percent and has special rules for income over that amount that effectively raises the tax rate.

Automakers received good news when the Senate bill maintained the existing tax credit for consumers who purchase electric vehicles.

Under current law, consumers who purchase plug-in EVs qualify for a federal tax credit of between $2,500 and $7,500, depending on the size of the vehicle battery. The credit phases out for each automaker when it reaches 200,000 vehicles sold, a level that never has been reached. Clean-energy proponents and automakers argue that the electric-drive sector still is getting on its feet and needs the credit to provide companies an incentive to invest.

Most companies also will benefit from a phaseout of capital expenditure deductions, but less than Republicans originally proposed. Early plans called for an immediate write-off for new equipment as opposed to taking annual depreciations. Now, the plans would allow for equipment to be expensed over five years at 100 percent, but after that, the rate will gradually phase out over the next four years. The advantage of accelerated expensing is that it front-loads the benefits, creating greater return on investment.

The limitations on business interest and capital expense deductions were necessary to help keep the tax bill within budget rules for not increasing the deficit more than $1.5 trillion over 10 years.

Eliminating certain tax breaks could diminish the overall desirability of corporate tax reform for many businesses. That was especially true for dealerships before the floorplan financing exemption made it through, said Shaun Petersen, senior vice president of legal and government affairs for the National Independent Automobile Dealers Association.

"One of the concerns that we have is that at the end of the day, [overall tax reform] may not be a net gain, and that's especially true if interest rates creep. You wouldn't be able to lower the rate enough if they take away that deduction, so you could end up paying more in taxes," he said.

House and Senate leaders are expected this week to name their respective negotiating teams responsible for harmonizing the two tax bills.

[kscarbel2]

When did Social Security and Medicare become entitlement programs?

For more than 50 years, we and our employers paid FICA (Federal Insurance Contribution Act) payments from every paycheck received.

Thus, how is receiving payments from these two federal insurance programs in our old age now considered an "entitlement"?

Combined employee/employer Social Security and Medicare deductions totaled from 7.25 percent (1964) to the current 15.3 percent. Thus the benefits of Social Security and Medicare in retirement are not handouts. Rather, they are returns from an insurance policy managed by Congress and various agencies.

The payments were mandatory. It is estimated that through 2010, Social Security deductions exceeded benefits paid. But the excess, in the trillions of dollars, were raided repeatedly by Congress. Once the coffers were significantly depleted, paying benefits became a clear budgetary liability.

To attack or deny Social Security and Medicare is breaking a faith and contract with the American people who were forced to pay their FICA, and for employers who were required to match their payments since the inception of these programs.

The American people all need lawyers for the biggest class-action suit in history: The people of the United States versus the Congress of the United States.

[HeavyGunner]

Like you said the government has plundered the Social Security and Medicare account for years without repercussions. They’ve also (the government) chosen to give out social security and Medicare to many many people who have never contributed and are not citizens i.e. illegal aliens. The people have been buffaloed and badgered so much over the last 30 years with this PC culture we are made to feel it’s wrong to cut off people who aren’t even citizens from leaching off of us. 

[BillyT]

KSB, great minds think alike! Lol! You took the thoughts out of my mind word for word! When did entitlement become a bad word?! All of us who worked "on the books" paid into fica our whole lives! We are owed this money plain and simple! I have been apolitical my whole life,mostly because anyone beyond a drooling cretin can figure out where these rascals are coming from! (My apologies to drooling cretins) I keep hearing our "leaders" are getting ready to begin cutting social security!, and Medicare,we already have to buy "Medicare advantage plans" to cover the so called "doughnut hole" that medicare doesn't cover! Thereby enriching more effing insurance executives! And theyre gonna cut it?! I could go on all day, but one anecdote from about a year ago illustrates what I'm getting at! There was a guy in Tampa whose disability checks were cut off entirely he was obviously a lazy malingerer after all he still had one leg!! Should have gotten a job! My wife and I are fortunate to have enough to live on due to working all our lives Me since I was 11,her since 14! No big deal, there are thousands like us! If they cut our benefits we could live Frugally a couple years on our savings (I f some hacker doesn't steal them!) Barring any medical issues! Your correct about the class action! But it ain't gonna be easy! Wal Mart employees that they screwed in multiple stores nationwide, tried to create a class action, but our pals in the supreme court nixed it! I have have a personal connection to this for another time! Heavy Gunner,you're whole post is dead on! Gotta go shopping! Pray for me! Lol! Merry Christmas and happy New year to you all!

[BillyT]

Wal Mart by the way, admitted to bribing local officials in Mexico to get their stores built!,in a totally corrupt nation it's the cost of doing business! I guess we're not TOTALLY corrupt! There is one of their stores built right over a black bear den 8 miles from here over multiple protests!..... hmmmm

[mackey58]

That's the pisser ones that never contributed that get it ( illegals) and the raid on it by the government 

[BillyT]

Mackey58, you're right!

[mackey58]

Just like unemployment when you get laid off a couple weeks in the winter you a statement when you sign up on what your employer puts in I don't know  the first quarter  but the last 3 was 20 grand for each quarter BUT that's not gor me it's for the general  fund wtf is that b/s sorry off my soap box just pisses ya off collect off the sweat of the working person