- Jan 14, 2016
The U.S. Congress is creating a Frankenstein tax plan. Senate Republicans are rushing into a vote on their tax-cut effort. Changes to appease critics in their own party have yet to be settled, including a trigger to raise taxes if growth falls short of projections. To make matters worse, lower-income Americans will also face higher bills.
Senators are debating their proposals on Thursday and aiming to vote early Friday, even though all of the details aren’t finalized yet. Members of President Donald Trump’s party are desperate to have something to show their supporters for the 2018 midterm elections and hope to meet the expectations of the president, who wants to sign a bill into law by the end of the year.
One of the most contentious provisions still up in the air is an effort to appease Republicans concerned about the $1.5 trillion that tax cuts would add to the deficit over 10 years, according to the Congressional Budget Office’s analysis. One trigger mechanism could add up to $350 billion in corporate tax increases over a decade, starting in 2022, if economic expansion doesn’t meet forecasts. Worries about the trigger hitting during a recession, in addition to a separate push to require more tax cuts if growth surpasses estimates, are complicating the effort.
Another idea would increase tax breaks for pass-through businesses like partnerships. Separately, Senator Marco Rubio has pitched a revision to increase the proposed new corporate tax rate from 20 percent to 22 percent to pay for expanding the child tax credit already in the plan. The current federal corporate tax rate is 35 percent. To win support from moderate Lisa Murkowski, there is also a provision to open Alaska’s Arctic National Wildlife Reserve to oil drilling.
The Republican plan does not, however, provide relief for lower-income Americans. Taxes would go up every year through 2027 for people with an annual income of up to $30,000, according to the CBO. The effect would spread to individuals making up to $75,000 in 2027, because reductions in individual tax rates would expire.
Done in any comprehensive way, tax reform is fiendishly complicated. The last successful effort in 1986 took about two years under President Ronald Reagan. This time, the initial Republican tax framework, which lacked details on income brackets, for example, was released only in September. The haste is adding to the scary mess.
Botched process leads to Frankenstein tax plan