Now you see it... Senate Finance Committee Chairman Orrin Hatch has come up with his solution to his tax bill's Byrd rule problem. To help prevent the Tax Cuts and Jobs Act from losing revenue after 10 years, he's proposing to make nearly all individual tax cuts expire after 2025. The expiring provisions would include the individual income tax rate reductions, the larger standard deduction and child tax credit, the 17.4 percent deduction of income from pass-through businesses, and the repeal of the individual alternative minimum tax. The proposed corporate tax rate cut from 35 percent to 20 percent would be permanent.
Now you don't... Hatch would also add a provision to repeal the individual mandate to purchase insurance through the Affordable Care Act. That would satisfy President Trump's demands and free up another $300 billion. Hatch would use that revenue to increase the child tax credit to $2,000 and further reduce income tax rates for middle-income taxpayers.
The Senate won’t shake SALT. Although the draft Finance Committee bill would completely repeal the state and local tax deduction, Majority Leader Mitch McConnell acknowledged yesterday that full repeal will not be acceptable to the House. Somewhere in the process the SALT repeal will be scaled back.
The House plans to vote on the TCJA tomorrow. GOP leadership is confident it has the votes to pass the House version of the TCJA. But because the House bill is in serious violation of the Byrd rule, bit changes are inevitable in the Senate.
Whatever happened to dynamic scoring? For years, congressional Republicans insisted that the revenue effects of tax bills must include macroeconomic feedback. Now, with the biggest tax cut in years on the table, the House will vote without waiting for a dynamic score from the Joint Committee on Taxation. The congressional scorekeeper says it will not have enough time to complete such an analysis before this week’s vote.
The House version of the TCJA won’t help many families with children. TPC’s Elaine Maag explains that even though the TCJA expands the child tax credit, other changes in the tax treatment of families with children could mean many low to moderate income households would get little or no tax cut in 2018 compared to current law. Many may face tax increases by 2027.
But it does include a hidden top tax rate of nearly 50 percent. TPC’s Bill Gale explains the ins and outs of the House’s mysterious “bubble rate.” Bottom line: “Some taxpayers would face an effective marginal federal tax rate of 49.4 percent on wages—a rate generally not seen since 1986.”
No pressure, but Congress still has to pass a spending bill. The government’s spending authority expires on December 9. Not to worry: House Speaker Paul Ryan says he’s weighing a short extension to current spending authority to give appropriators more time to finish the spending bill before the end of this year.
And don’t forget the special Senate election in Alabama. On December 12, the Senate GOP could see its slim majority of two shrink by one if Democrat Doug Jones wins and fills the vacancy left by now-Attorney General Jeff Sessions. Of course, as The Washington Post explains, even if Republican candidate Roy Moore wins, it’s not clear that he’d back the GOP tax bill—especially since GOP senators’ support of Moore is dwindling. This may be one reason why Hill Republicans are rushing to pass a tax cut before incumbent Luther Strange (who was appointed to fill Sessions’ seat) must relinquish his post.
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