It’s a multi-trillion plan with few details. The Unified Framework for Fixing Our Broken Tax Code reflects months of internal GOP negotiations, but still leaves a lot to the imagination. For example, Republicans agreed on a 20 percent corporate tax rate, a 25 rate on pass-throughs and three, or maybe four, individual income tax rates. But they didn’t say what income levels would be in each bracket. Nor did they say how they’d pay for those generous tax cuts. In Indiana, President Trump insisted the plan was a middle-class tax cut that is “not good for me, believe me.”
Maybe, but probably not. TPC’s Howard Gleckman has six takeaways from the Big Six plan. The Wall Street Journal’s Richard Rubin offers five (paywall) of his own. Some of their lessons are the same: The plan is too vague to know how it would affect individual taxpayers, it will benefit very high-income taxpayers, and it would add trillions to the deficit.
As for the taxation of pass-through business income…. The blueprint calls for a 25 percent rate on business income taxed through a business owner’s individual return. A new CNBC/SurveyMonkey poll finds that 22 percent of small business owners didn't know their effective tax rate in 2016. Another 22 percent believe the rate—which currently maxes out at 39.6 percent—is already somewhere between 16 and 25 percent.
With so many unanswered questions, can Congress pass a bill by the end of the year? GOP Senator Roy Blunt of Missouri says lawmakers “need to quickly choose which of these fights you can win within 75 days.” He believes tax reform must be finished before the December break, before all eyes turn to the 2018 election. GOP Senator John N. Kennedy of Louisiana wants it done even sooner. “There is no margin of error here, the economy needs it and frankly our political party needs it. We need to do tax reform. We need to do it by November, we need to make it retroactive to the first of the year, we need to work nights, we need to work weekends, we need to do whatever it takes.”
That timeline assumes swift passage of a Senate budget resolution. Senate Republicans want to pass a budget resolution next week. It would be the vehicle that lets them pass a tax bill with 51 votes, including no Democrats. The resolution is likely to make room for $1.5 trillion in lost revenue from the tax cuts. But Republicans are battling among themselves over whether it will be a shell budget or one that cuts entitlement spending and other government programs.
Can Congress pass a tax bill without bipartisan support? Senate Finance Committee Chair Orrin Hatch says it’s virtually impossible without Democratic support. “I think we've got to put aside the differences and start working together,” he says. Will the House Freedom Caucus, which has thrown its support behind the blueprint, abide any potential compromises? Democrats are already deriding the blueprint as a giveaway to the rich.
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