The House Tax Bill: Middle Class Cut or Big Bait-And-Switch?
When it comes to tax reform, the political posturing may dominate the news — What’s in? What’s out? Who wins? Who loses? — but what really matters is the math. That’s certainly the case under the current climate, where unilateral control of the White House, House and Senate gives the GOP an opportunity to pass its vision of tax reform without a single vote from a Democrat in the Senate. If, that is, the Republicans can get the math to work.
Specifically, the 2018 budget reconciliation process will allow a tax bill to pass the Senate with a simply majority — rather than the standard 60 votes — only if that bill does not provide for more than $1.5 trillion in tax cuts over the next ten years. Go over that amount, and the GOP will need Democratic buy-in.
But big promises have been made. President Trump declared this THE BIGGEST TAX CUT IN HISTORY. (It is not). Individual rates are going to be slashed. So is the corporate rate. And the rate on business income. The estate tax and alternative minimum tax will be no more. You get the idea…lots of big tax cuts are coming, but how do you get that to fit into a $1.5 trillion-sized box?
You start by adding back as many deductions as politically palatable. But that’s the tricky part of tax reform; for every deep-rooted preference you try to extract from the law, a powerful special interest group will tug just as hard in an effort to keep it in place.
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Authored by Tony Nitti, Withum Partner and writer for Forbes.com.
