By JIM TANKERSLEY, THOMAS KAPLAN and KENNETH P. VOGELNOV. 3, 2017
A home for sale in Seattle. A provision in the tax plan, including a limit on interest deductions for mortgages above $500,000, has residential real estate interests concerned. Credit Stephen Brashear/Associated Press
WASHINGTON — The Republican tax rewrite unveiled on Thursday .. https://www.nytimes.com/2017/11/02/us/politics/tax-plan-republicans.html .. has set off a scramble among lobbyists and interest groups desperate to preserve prized tax breaks that are suddenly at risk in the sweeping bill moving through the House.
Yet the ability of K Street to prevent longstanding tax provisions from getting the ax is running headfirst into Republicans’ own mad dash as they attempt to quickly pass the tax rewrite and get it to President Trump’s desk by Christmas.
The rapid pace set out by Republican leaders is by design: They want to prevent the kind of arm-twisting that has long bedeviled previous tax overhaul efforts by leaving little time for outside groups to blitz lawmakers with concerns. Several consultants and lobbyists said on Friday that individual companies were just beginning to digest how the 400-plus page bill, which drastically changes how American businesses are taxed at home and abroad, would affect their bottom lines.
Another complication was presented by President Trump, who wants to include a controversial measure to do away with the Affordable Care Act’s mandate that most Americans have health coverage or pay a penalty. On Friday, the House’s leading tax writer opened the door to including that provision, saying that no decision had been made.
Even without injecting health care into the debate, the tax bill will find itself under scrutiny and will be picked apart by those who stand to lose.
“It’s pretty weedy stuff,” said Dave Camp, a former chairman of the Ways and Means Committee who wrote a 2014 tax bill that laid some of the groundwork for the current one. Mr. Camp, who is now a senior adviser for PricewaterhouseCoopers, said that when lawmakers attempt to overhaul the code, “you get significant pushback on just about everything.”
The groups pushing back the hardest on Friday included those in the real estate industry. Some of them had raised concerns before the bill was released, only to discover their biggest fears realized in the draft legislation. The bill includes several measures long opposed by those groups, including a limit on interest deductions for new home purchases of $500,000 or more and an expansion of the standard deduction.
The Mortgage Bankers Association plans conference calls and discussions with members of Congress throughout the weekend, said David Stevens, the group’s president. Realtors are running online ads raising concerns over those provisions.
Mr. Stevens complained about the “piling-on effect” of the bill’s provisions on homeownership incentives, and said the bill is “moving really fast” through the House. “Every special interest is going to have concerns,” he said. “If Congress is going to have integrity, they’re going to listen to them and make the best decisions.”
Some of those groups were already training their efforts on a still-unfinished Senate version of the legislation, fearing that House leaders — who introduced their bill on Thursday — were intent on speeding the plan to a vote with little time or opportunity to amend it. The House bill, as one consultant to business groups put it, feels “pretty baked” already.
If Republicans decide to take aim once more at the Affordable Care Act, that would add yet another dimension to the battle over taxes.
Representative Kevin Brady of Texas, the chairman of the House Ways and Means Committee, said no decision had been made about whether to include repeal of the so-called individual mandate. But he said Mr. Trump wants its inclusion, and he indicated that Republicans wanted to evaluate the fiscal effects of taking that step. Senate Republicans may not be as enthused about its inclusion.
“While I support replacing the individual mandate with an auto enrollment system that allows for a consumer to opt out, it would make it more difficult to pass a tax relief bill if it is combined with a repeal of the individual mandate,” Senator Susan Collins, Republican of Maine, said on Friday.
Members of Mr. Brady’s committee will meet Monday to begin marking up the tax bill, but lobbyists fear the process will not yield any substantive changes. Republican leaders are hoping to pass it through the House by Thanksgiving. The Senate, meanwhile, stands ready to release its bill as soon as the House committee approves its version.
Representatives from industry groups were carefully analyzing how the companies they represent would be affected by a proposal in the House bill that would create a 20 percent excise tax on payments to foreign affiliates.
A nurse attending to medical equipment at the Orange County Children’s Hospital in Orange, Calif. By ripping out a major component of President Barack Obama’s health law, Republicans could claim at least a partial victory on an issue that has stymied them all year. Credit Mike Blake/Reuters
The small-government advocacy groups spearheaded by the billionaire Republican megadonor brothers Charles G. and David H. Koch have been seeking to rally opposition to the excise tax from other conservative groups, as well as trade and industry associations.
The Koch groups already have expressed concern about the provision — as well as a plan to retain an upper-income tax bracket — in meetings this week with the Speaker, Paul D. Ryan of Wisconsin, Mr. Brady and Senate leadership.
The proposed excise tax is “misguided” and its costs would be passed along to consumers, said Tim Phillips, the president of Americans for Prosperity, a nonprofit group funded by the Koch brothers and their network of donors.
Yet Mr. Phillips said Americans for Prosperity remains supportive of the overall legislation and is walking a delicate line between trying to tweak the bill without diminishing its prospects.
“It’s important to keep this thing moving forward in the House as we try to improve it,” he said, “and then we get another bite at the apple in the Senate.”
Republican leaders warned on Thursday that interest groups would attack the bill and said they would resist efforts to keep things “status quo.”
“You’re going to gore some sacred cows in an operation like this,” said Representative Tom Cole, Republican of Oklahoma, on Friday. “But I really worry about more what happens inside the building. And as I talk to members, they’re not feeling a lot of pressure at this point against this.”
Any lobbyist push is complicated by the House’s math problem: The bill must contain enough revenue to offset its corporate and individual tax cuts. An independent analysis of the bill from the Tax Foundation on Friday suggested that problem might be larger than Republican leaders anticipated.
The analysis found that the draft legislation would cost too much to survive the budgetary requirements needed to pass the Senate on a party-line vote — a sign that Republicans will almost certainly need to rework it in order to keep their hopes alive for delivering a bill to Mr. Trump’s desk by Christmas.
The analysis found that the bill would add $2 trillion to the federal budget deficit over the next decade, an amount that shrinks to $1 trillion even when additional economic growth effects from the bill are factored in.
“This does not pay for itself,” said Scott Greenberg, a senior analyst at the Tax Foundation.
The bill would continue to add to deficits after 10 years, violating the procedural budget rules that Republicans are hoping to use to avoid a Democratic filibuster in the Senate.
- [Insert: Trump’s Tax Math Has a Big Problem [tab headline: "The Impossible Math Behind Trump's Tax Cut"] [...] The Trump tax plan, because it generates deficits as far as the eye can see, violates what’s known as the transversality condition, which says that debt relative to the size of the economy cannot grow to infinity; fiscal policy is sustainable over the long run only if there will be surpluses in the future to offset deficits today. True, Keynesian-style tax cuts like President Barack Obama’s 2009 stimulus package also generate red ink, but they’re designed to phase out when the economy no longer needs the jolt. http://investorshub.advfn.com/boards/read_msg.aspx?message_id=131139304 ] -
The White House is projecting robust economic growth from the tax cut, and the analysis found that, if those growth projections hold, the bill would create an additional one million jobs and raise incomes for rich, poor and middle-class Americans. If those growth projections fail to materialize, the top 1 percent of earners would see income gains twice as large as those seen by middle-class workers.
When economic growth is taken into account, the gains would be more evenly distributed, with the middle class seeing the biggest income increase on a percentage basis. That is because the Tax Foundation assumes additional growth spurred by business tax cuts largely finds its way into workers’ paychecks.
Republicans are looking for other ways to squeeze more dollars out of the bill. On Friday, they released an amended version that would reduce the value of the income tax cuts for individuals by $90 billion over the course of a decade and slightly shrink the estimated cost of the legislation.
The amended bill includes a technical change that immediately adopts a revised measure of inflation, known as “chained C.P.I.,” which would change how inflation is calculated, thus slowing the speed at which tax brackets grow with inflation. As a result, Americans would more quickly find themselves in higher marginal tax brackets — jumping from a 12 percent top bracket to 25 percent, for example — as their incomes increase.
The chained measure would also slow the value growth of some inflation-adjusted tax benefits, such as the earned-income tax credit.
Who Wins and Who Loses From the Republican Tax Plan
By ALAN RAPPEPORTNOV. 2, 2017
House Republicans unveiled their tax cut bill during a news conference at the Capitol on Thursday. Credit Al Drago for The New York Times
WASHINGTON — Veterans of previous efforts to rewrite the tax code warn that overhauling the tax code is hard because it creates winners and losers — and the losers fight harder than the winners to make sure the legislation fails.
The tax plan released by House Republicans on Thursday did not disappoint, cutting taxes and erasing popular deductions in ways that would reorient big chunks of the American economy.
The bill loses revenue in some areas and raises it in others, and those are where the battle lines will be drawn in the coming weeks, as members of Congress scramble pass a law that President Trump wants to sign by Christmas.
Winner: Business
Slashing the corporate tax rate to 20 percent from 35 percent would be a boon to firms that for years have complained of being shackled by high taxes. It remains to be seen if the benefits of this lower rate would be felt more by shareholders or workers. In selling the plan, Republicans have said that employees of companies would see their salaries rise because of a lower corporate tax rate.
“Anything that brings down corporate tax rates in the right way here in the United States would be helpful,” Kevin P. Clark, chief executive of Delphi Automotive, said on the company’s third quarter earnings call.
Winner: Multinational corporations
American multinational companies fare well under the plan, which calls for shifting toward a more territorial tax system, albeit with caveats. The plan levies a 10 percent global minimum tax on overseas earnings, but that’s still far below the current 35 percent they need to pay on income that’s returned home. In theory, the new system will reduce the “lockout” effect that encourages firms to stash cash abroad.
The plan would also force companies to pay a one-time 12 percent tax on “liquid” assets that are held overseas, like cash. They would have eight years to pay the tax. Winner: Some middle class families
The Republican tax plan would collapse the income tax brackets to three from seven and nearly double the standard deduction, meaning many middle class families would see smaller tax bills. However, this impact will vary depending on every taxpayer’s individual situation. People who live in high-tax states and currently itemize their tax returns could pay more because of the limitations on the state and local tax deduction.
The capping of the mortgage interest deduction could also impact middle class families who live in states with high property taxes. And, if the legislation dampens home prices, as realtors are warning, it could diminish the wealth of middle class families whose biggest investment is generally their home.
Winner: The rich and their families
Despite all of the talk about helping the middle class, it is hard to argue that the wealthy do not benefit from the tax plan. The top tax rate for millionaires holds steady at 39.6 percent, while the estate tax and the alternative minimum tax or A.M.T. — which hit primarily wealthy Americans — are ultimately eliminated. Mr. Trump, a billionaire, has criticized the “death tax” and the A.M.T. provisions over the years as unfair.
Winner: Hedge funds and other general partners
President Trump campaigned on getting rid of the so-called carried interest loophole, which allows fees paid to some of the richest people on Wall Street to be taxed at low capital gains rates, not income tax rates. But it makes no appearance in the House plan.
Carried interest, which is essentially the profits reaped by hedge fund managers and private equity executives, is currently taxed at a long-term capital gains rate that is about half the roughly 40 percent ordinary income rate for the highest earners.
Loser: The real estate industry
The tax plan doubles the standard deduction and caps the mortgage interest deduction at $500,000, down from $1 million. It also caps property deductions at $10,000. This significantly weakens a tax incentive that has encouraged many Americans to buy homes rather than rent. Homebuilders and realtors quickly came out against the bill, warning that it could create a recession in the housing market and cause a slide in home prices.
Loser: The sick
Under the Republican plan, the deduction for medical expenses would be eliminated. This currently applies to taxpayers, spouses or other dependents with health expenses that exceed a tenth of the taxpayer’s income. AARP, which advocates for retirees, said that they strongly opposed the repeal of the deduction and said that doing so would impose a “health tax” on the oldest and sickest Americans.
Loser: Charities.
Like the housing industry, charities are also fretting about the impact of doubling the standard deduction. While charitable deductions are preserved in the plan, middle class families that take advantage of the larger standard deduction could be less likely to give to charity as a way of reducing their taxable income. This, in turn, could mean less giving.
Loser: University endowments
Currently, private universities are exempt from the tax that private foundations pay on their investment income. That would change under the Republican plan, which would levy a 1.4 percent excise tax on private colleges and universities with at least 500 students and assets that are valued at $100,000 per full-time student. The plan will likely draw strong opposition from the higher education community. It would raise $3 billion in revenue over a decade.
Loser: Rare disease sufferers
The tax plan calls for the repeal of a tax credit that drug companies use to perform clinical testing for drugs that treat rare diseases. The credit is central to the business model for such firms and eliminating it could mean that big pharmaceutical companies will have little reason to invest in drugs that help small patient populations.
Loser: The deficit
Republicans used to consider themselves deficit hawks, but their plan will add at least $1.5 trillion to the federal debt over a decade. Many economists think that it will be more than this, because Republican tax-writers are using optimistic assumptions about economic growth when assessing their plan. If deficits continue to swell, it would depress economic growth and lawmakers would likely have to consider raising taxes or cutting spending to compensate as an aging population puts pressure on federal entitlement programs like Social Security and Medicare. Loser: Tesla (and electric car owners)
The Republican plan repeals the tax credit currently allowed for taxpayers who own a “qualified plug-in electric-drive motor vehicle.” Under current law, a taxpayer may claim a maximum credit of $7,500 for each qualified plug-in electric-drive motor vehicle placed in service. The bill would take that benefit away. https://www.nytimes.com/2017/11/02/us/politics/republican-tax-plan-winners-losers.html
Why a Republican owner of a booming business says he wants a tax cut (and what it says about the GOP’s biggest goal)
"Corporate tax: the great incidence hoax"
Douglass Henry’s factory in Lebanon, Pa., is about a mile from the historic downtown, just past a “help wanted” sign at a KFC and a “welder needed” sign outside a state office. (Mark Makela/for The Washington Post)
By Todd C. Frankel November 19 at 7:27 PM
[...]
Republican lawmakers argue that U.S. companies need encouragement to spend more and generate additional economic growth. But business has been good across America, where corporate profits sit near record highs and unemployment near record lows. And although GOP lawmakers say they are focused on delivering benefits to the middle class, Congress’s official scorekeeper says the bulk of the benefits of the proposed legislation flow to the wealthy and to corporations.
The bill features “a very top-heavy distribution,” said Edward Kleinbard, a former chief of staff for Congress’s nonpartisan Joint Committee on Taxation and now a law professor at the University of Southern California. The markets “are awash in capital today, and there’s not a sign of needing more investment.”
But for the GOP, the success of the effort to overhaul the tax code has become nearly synonymous with the question of whether Republicans can accomplish anything substantial during a rare moment of unified control of the federal government. The party is acutely aware that an inability to deliver would upset the business interests that have long been a key part of the Republican base.
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