The House and Senate tax bills move along. The Senate Finance Committee continues to slog through its ever-changing version of the Tax Cuts and Jobs Act. Chairman Orrin Hatch still hopes to complete a mark-up by the end of the week. Democrats likely will have lots of amendments to slow the bill down. The House, meanwhile, plans to vote today on its version.
Defending the indefensible. TPC’s Howard Gleckman reviews the Finance Committee’s latest plan that would repeal almost every individual tax provision in its bill while retaining corporate tax cuts. “This is indefensible tax policy. It would become the apotheosis of tax extenders, effectively turning the entire individual income tax code into the one giant temporary tax cut… [I]t is impossible to defend at a time of near full-employment, with the Federal Reserve already raising interest rates as the economy strengthens.”
Hiding the true cost. The Committee for a Responsible Federal Budget says the Finance panel’s TCJA hides $515 billion through budget gimmicks. They include the expiration (and hoped-for renewal) of tax cuts. Were they permanent, they’d add $240 billion to the bill’s cost. On top of the gimmicks, there’s interest. Debt service on the base bill would total $280 billion. “As a result,” concludes the CRFB, “trillion-dollar deficits would return by 2020 and debt would exceed the size of the economy in just over a decade.”
Losing one (maybe two—or three) GOP senators. Wisconsin’s Ron Johnson says he cannot support his party’s TCJA because it unfairly benefits corporations more than other types of businesses. “If they can pass it without me, let them,” Johnson told The Wall Street Journal (paywall). “I’m not going to vote for this tax package.” Johnson also says the tax overhaul’s legislative process thus far has been closed to his input and misleads the public about the nature of proposed changes. Senator James Lankford is undecided too, due to his concerns about budget deficits. Maine’s Susan Collins, meanwhile, continues to question whether it is a good idea to include a proposal to repeal the Affordable Care Act individual mandate in the tax bill.
Muddying the waters (again). Senator John Cornyn says the Senate will probably restore the ACA’s cost-sharing reduction payments in its end-of-year spending bill: “With the repeal of the individual mandate [in the TCJA] it probably makes more sense.”
Earning little public support. A new Quinnipiac poll finds that just 25 percent of respondents approve of the GOP tax plan, while 52 percent disapprove. A majority believes (correctly) that the wealthy would benefit the most from the plan.
Discouraging charitable giving. TPC’s Joe Rosenberg and Phillip Stallworth show how the House version of the TCJA would significantly reduce the tax incentive to donate. While the House bill would not directly change the charitable deduction, it would double the standard deduction and limit the value of itemized deductions. The combined effect: Giving would decline by 4 percent to 6.5 percent in 2018. Repealing the estate tax could reduce bequests by an additional 15 percent to 30 percent, or $4 billion annually.
Meanwhile, the IRS Advisory Council has some tax administration recommendations for the agency. The Internal Revenue Service Advisory Council issued its annual report for 2017. It includes numerous recommendations on new and continuing issues in tax administration. They include adequate funding for the IRS, effective communication with and monitoring of private debt collectors, and legislation authorizing enforcement of minimum standards of competence for all tax practitioners and tax return preparers.
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