How much will the Senate tax bill change over the next three days? The President expects “mathematical changes” to the Senate Finance Committee’s Tax Cuts and Jobs Act, while a handful of Senate Republicans continue to express reservations about the bill’s impact on the deficit and small businesses. Still, GOP leaders added Senator Rand Paul to their “yes” list.
Speaking of small business: The Senate’s TCJA would impose high marginal tax rates on some pass-through business owners. TPC’s Joe Rosenberg explains how some of owners of partnerships, S corporations, and sole proprietorships could face marginal tax rates higher than 70 percent under the Senate’s tax bill. A proposed 17.4 percent deduction for qualifying pass-through income would be limited for “specified service businesses” but those limits would not apply to taxpayers with taxable income below $250,000 ($500,000 for joint filers). Because the deduction phases-out over an income range of just $50,000 ($100,000 for joint filers), taxpayers subject to the phase-out could face very high marginal tax rates.
Haste makes waste, when it comes to tax bills. Says Marty Sullivan of TaxNotes: “There is no reasoned justification for rushing this bill at unprecedented speed through the process. Republicans are doing it because they have the power—and that’s that. Because of the necessarily sloppy drafting of this legislation, if it becomes law Treasury will be writing regulations and Congress will be enacting technical corrections for years.”
What ever happened to broadening the tax base? TPC’s Howard Gleckman reflects on the goal of “broadening the base” in the 2014 tax reform bill proposed by now retired Rep. Dave Camp (R-MI). His plan would have eliminated or reduced high-cost—and exceedingly popular—tax preferences. But of the ten largest tax expenditures in the Internal Revenue code, the Senate Finance panel’s TCJA targets only one: the state and local tax deduction. “The Senate leadership made a choice to not take the same road Camp did,” concludes Gleckman. “The result: A bill that looks much more like a tax cut for high-income households than tax reform.”
Taxing alcohol may not reduce drunk-driving accidents. A new TPC report shows that tax increases on alcohol failed to change the state’s trajectory of fatal drunk driving crashes. Writes TPC’s Jon Iselin: “Results suggest that both federal and state policymakers who want to reduce the harmful effects of drunk driving may want to look for alternatives to raising alcohol taxes.”
Can tax reform include a carbon tax? Tune in this afternoon at 2:00 to learn how: To control the risk of climate disruption, many economists would put a price on carbon emissions. Such a tax could help fund pro-growth tax reforms, help the US reduce greenhouse gas emissions, reduce conventional air pollutants, replace less efficient and effective Clean Air Act regulations, and eliminate the need for disparate state-level measures. It could also help pay for infrastructure investments, expanding the Earned Income Tax Credit, and other priorities. How could a carbon tax fit in the current debate over tax reform? See the webcast for a discussion among congressional leaders and policy experts hosted by TPC and the Cross-Brookings Initiative on Energy and Climate.
It’s Giving Tuesday: Consider the Tax Policy Center. TPC produces independent, nonpartisan analyses of tax and budget issues and shares findings with policymakers, journalists, advocacy groups, and citizens. The goal: Ensure that everyone has access to accurate information about how our tax system works and how changes in our tax code will affect households and the federal budget. Support TPC: You’ll help inform the debate about America's fiscal future. And it might be prudent to act quickly: Next year, if provisions of the tax bills under consideration become law, they would reduce the tax benefits of charitable donations if you itemize.
Interested in subscribing to the Daily Deduction, the Urban-Brookings Tax Policy Center summary of the day’s tax news? Sign-up here to get the Daily Deduction delivered to your inbox every morning. If you’d like to tell us about a new research paper or have any comments about our feature, email us.
