Changes to GOP tax bill reduce individual benefits by tens of billions of dollars
By Mike DeBonis,
A change made Friday to the House Republican tax bill could reduce the bill’s benefit to the middle class by tens of billions of dollars.
The revised bill changes the way future updates to key individual tax parameters, such as bracket thresholds and the amount of the standard deduction, would be calculated — by using a measure of inflation known as “chained CPI” that tends to grow more slowly than the “unchained” alternative.
The aggregate effect of the change, according to revenue estimates prepared by the nonpartisan Joint Committee on Taxation, would be to reduce the amount of tax cuts for individuals over the next 10 years by $81 billion.[GOP tax plan would shrink mortgage interest benefit, slash corporate tax rate]
Those cuts would not affect the GOP’s planned $448 billion tax cut for “pass-through” businesses — firms organized so that their earnings are taxed as individual income — and would increase the benefit to corporations by $7.6 billion. It would modestly increase, by $700 million, the benefit to those paying estate tax in the coming years.
House Ways and Means Committee Chairman Kevin Brady (R-Tex.) said in a statement Friday that the new version would “conform the bill with the budget instruction” — a reference to constraints imposed by the special process Republicans are using to avoid a Democratic filibuster in the Senate. The bill cannot increase the federal budget deficit by more than $1.5 trillion, and Thursday’s draft edged right up to that limit.
Also bowing to the budget process, Brady said he removed an international tax provision that “would have possibly jeopardized” the bill’s ability to be considered under Senate rules.
The changes, however, also had a significant fiscal effect that could only exacerbate criticisms from Democrats that the bill largely treats middle-class taxpayers as an afterthought while delivering hundreds of billions of dollars of benefits to corporations and the wealthy.
Under the JCT’s analysis, the initial Tax Cuts and Jobs Act directed about 21 percent of its cuts to individuals of all income levels. Meanwhile, businesses reaped about 68 percent of the benefit, while a planned elimination of the estate tax — which applies only to the wealthy — would make up 11 percent of the overall revenue reduction.[Public will turn against GOP tax bill, Schumer predicts: ‘The more it’s in sunlight, the more it stinks’]
The revised bill lowers the percentage of the individual tax cut from 21 percent to 16 percent of the bill’s aggregate fiscal impact, according to the JCT’s numbers.
Brady’s statement did not address the fiscal implications of the changes, nor did it explain why he chose to use chained CPI rather than look at other revenue-raisers.
“This is another important step on our path to pro-growth tax reform that will deliver more jobs, fairer taxes, and bigger paychecks for people across our country,” Brady said.
Republican leaders say that their tax bill will broadly help middle-class taxpayers, citing an example family of four making $59,000 that would see a $1,182 tax cut in 2018. But that tax cut could erode in the future because of the less generous indexing under chained CPI, as well as the scheduled sunset after 2022 of a tax credit available for filers and non-child dependents.
According to an analysis updated Friday by David Kamin, a New York University law professor who previously served as an economic adviser to the Obama administration, an $1,106 tax cut in 2018 under the GOP bill would become a $457 tax increase in 2027 when compared with current law.
Republicans argue that Congress is unlikely to let the tax credit in question expire. Lawmakers have routinely voted for “extenders” meant to preserve tax provisions that would otherwise sunset for budgetary reasons.
Brady said additional, “more substantive” changes to the bill are coming Monday, when the Ways and Means Committee launches a multiday “markup” to debate and potentially amend the bill.
Read more at PowerPost