The GOP Tax Reform Explained

JoshuaEconomic


“Simpler Tax Code For All Americans”

GOP TAX REFORMS

1. Tax relief for middle class Americans: In order to achieve the American dream, let people keep more money in their pockets and increase after-tax wages.

2. Simplify the tax code to reduce the headaches Americans face in preparing their taxes and let everyone keep more of their money.

3. Grow the American economy by discouraging corporate inversions, adding a huge number of new jobs, and making America globally competitive again.

4. Doesn’t add to our debt and deficit, which are already too large.

2016 Trump Campaign
Tax Reform Goals

“I believe that if we can develop an actual piece of legislation that helps my state and promotes growth, we’d want to move it forward. We don’t want to be obstructionists for the sake of being obstructionists.”
Rep. Josh Gottheimer (D-NJ)

“The Trump administration’s tax plan, as proposed during his campaign, would provide significant tax cuts to nearly all millionaires in New York City — like President Trump himself — while actually raising taxes on many single parents, moderate- and middle-income New Yorkers, and working families,”
Scott Stringer, New York City comptroller

“If your goal is trying to grow the economy, to help create jobs and help families do better, the more that you do on the code, the more economic impact you’re likely to have.”
Dave Camp, former House Ways and Means chair

“Our plan makes the tax code simpler, fairer and flatter, so that it’s not only easier to do your taxes, but it’s always easier to have piece of mind at critical moments in life.”
Speaker of the House Paul Ryan

What is it?

The administration is close to completing its tax reform proposal, according to (Treasury Secretary Steven) Mnuchin. He said that the proposal would be aimed at delivering a tax cut for the middle class and would include reforms to both personal and corporate taxes. The administration would push to get Congress to pass a tax bill before the August recess, Mnuchin said.
Breitbart

President Trump’s Tax Reform Outline:

Income tax rate Long term capital gains/dividends Single filers Married filers Heads of household
0% to 12 % 6% $0 to $37,950 $0 to $75,900 $0 to $50,800
25% 12% $37,951 to $191,650 $75,901 to $233,350 $50,801 to $212,500
33% 16.5% $191,651 and up $233,351 and up $212,500 and up

They too offered lower tax rates for households, and larger standard deductions, and lower taxes on capital gains. In exchange, popular deductions for home mortgage interest (for new home buyers) and charitable giving would be reduced.
Politifact

House Republican’s “A Better Way” Outline:

Income tax rate Long term capital gains/dividends Single filers Married filers Heads of household
0% to 12 % 6% $0 to $37,950 $0 to $75,900 $0 to $50,800
25% 12% $37,951 to $191,650 $75,901 to $233,350 $50,801 to $212,500
33% 16.5% $191,651 and up $233,351 and up $212,500 and up

Obstacles

In spite of the GOP’s efforts to discredit it, Congressional Budget Office (CBO) has emerged from the ACA repeal fight stronger than ever.

CBO (and the Joint Committee on Taxation) will play an even larger role in the tax reform debate because whether the plan adds to the budget deficit will be one of the biggest issues. As was the case with ACA, a bad score from CBO on tax reform could easily force the legislation’s drafters back to the drawing board and substantially reduce support for the overall effort.

All this means that, rather than being the slam dunk everyone had been assuming, corporate tax reform this year could be more like a desperation shot from halfcourt at the buzzer.
Forbes

The possibility that the administration will now propose a very different tax plan from what House Republicans have in mind — like an old-fashioned tax cut when House leaders want something bigger, bolder — threatens to complicate the already difficult fight for a once-in-a-generation tax-code rewrite.
Politico

On tax reform, the Freedom Caucus (and Speaker of the House Paul Ryan) primarily wants to cut rates for the rich. Trump wants a broader tax cut, but one that will increase the deficit dramatically — which the Freedom Caucus will have a hard time swallowing, in part because doing so would expose them to primary challenges.

Trump could in principle pick up Democratic support, for example if he adds some infrastructure spending. But why would any Democrat want to assist a president who not only appoints people like Bannon, DeVos, Pruitt, and Perry, but also gives those secretaries free rein to implement damaging and irresponsible policies at home and abroad?
Market Watch

Conclusion

While Republicans face a “tough environment” in the wake of the failure on their health-care bill, it doesn’t necessarily mean they’ll have to scale back their larger tax reform efforts to just tax cuts, former House Ways and Means Chair Dave Camp told CNBC on Thursday.

“Doing a comprehensive tax reform bill, in many ways having more issues on the table, more issues at stake, is somewhat easier than trying to do a very narrow focused” tax cut, he said in an interview with “Closing Bell” on Thursday.

“If your goal is trying to grow the economy, to help create jobs and help families do better, the more that you do on the code, the more economic impact you’re likely to have.”
CNBC

Essentially, Republicans need to decide between an ambitious tax reform, and in which the entire system of either corporate or personal taxes (or both) is changed, or a simple tax cut, which leaves the current structure in place and just either lowers rates or carves out new special treatments or both.

The big obstacle both share is found in congressional procedural rules. A normal bill is subject to a Senate filibuster, which would require all 52 Republicans to unite and find eight Democrats willing to vote with them to defeat the filibuster. That’s not going to happen.
Bloomberg


Modified: March 31, 2017

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