The Tax Cuts and Jobs Act: Not going to pay for itself. The congressional Joint Committee on Taxation’s dynamic score of the Senate’s Tax Cuts and Jobs Act estimates that the bill would increase the federal debt by $1 trillion over ten years. The JCT estimates $458 billion in new revenues from growth partially offset by $50 billion in increased interest payments. That estimate is far rosier than the Penn-Wharton Budget model’s projections.
A final Senate vote today? Not for a while. Debate on the bill began yesterday. While John McCain indicated that he will vote for the bill, it keeps running into problems and continues to change. JCT’s dynamic score doesn't help. The Senate leadership acknowledged that a proposed “trigger” demanded by at least three GOP senators—one that is supposed to roll back some tax cuts if the TCJA fails to boost the economy as much as expected—is no longer in the cards. Some senators want to find more revenue by cutting the corporate rate to 22 percent instead of President Trump’s desired 20 percent. Today may be a long day. But is this a real roadblock or just a bit of last-minute drama?
About Senator Collins… She wants Congress to pass legislation to lower healthcare premiums before it passes a tax cut. The Alexander-Murray bill would reinstate cost-sharing payments under the Affordable Care Act. Another bill sponsored by Collins and Senator Bill Nelson would set up health insurance programs for older and sicker individuals, She wants both included in a funding bill needed to prevent a government shut-down on December 8.
Speaking of older adults… The AARP is against the Senate’s TCJA, telling senators that the bill could lead to billions of dollars in Medicare cuts. It also objects to higher insurance premiums for people aged 50-64 who buy on the individual market.
As for another individual: How might President Trump fare under the TCJA? The New York Times’ James Stewart reviews the TCJA and concludes that “the proposals seem almost tailor-made to enrich the president and people like him.” Indeed, TPC’s Steve Rosenthal says “Trump will make out like a bandit on all the big items… Trump will get a huge windfall on his rental, license and royalty income.” Those specific income sources remain eligible for the bill’s lower tax rates on pass-throughs. What would happen if Trump was a married doctor earning $524,000 a year?
It is all about expectations. TPC’s Eric Toder explains why some congressional Republicans see the TCJA as only a modest tax cut: They may be comparing the bills to much more generous presidential campaign promises. Eric shows how proposals from Jeb Bush, Marco Rubio, Ted Cruz, and candidate Donald Trump compare to the two versions of the TCJA now pending in Congress. The House-passed TCJA would cut taxes by 0.7 percent of pre-tax income in 2027 while the Senate bill would reduce taxes by 0.3 percent of income. During the campaign, Rubio proposed cutting taxes by 2.7 percent of income while Ted Cruz would have cut taxes by 5.3 percent of income by 2025. Donald Trump’s fall 2016 proposals would have reduced taxes by 3.4 percent of income in 2025. It is always about the baseline.
If you’d like to tell us about a new research paper or have any comments about the Daily Deduction, TPC’s summary of the day’s tax news, email Renu Zaretsky.
