Tax plan rolls on
Republicans in the Senate passed the most sweeping tax overhaul in a generation early this morning, dramatically lowering the corporate tax rate, even in the face of projections that the plan would increase taxes for lowand middle-class households and add a trillion dollars to the deficit.
The bill’s passage was made possible by last-minute deals cut with holdout senators that included agreeing to fatten tax breaks for millions of businesses and letting people deduct local property taxes. The tax cuts included in the measure, which is the boldest rewrite of the nation’s tax system since 1986, target primarily businesses and higher-earning individuals.
Congress’ nonpartisan Joint Committee on Taxation has said the bill’s reductions for many families would be modest and said by 2027, families earning under $75,000 would on average face higher, not lower, taxes.
Joel Prakken, chief U.S. economist with IHS Markit, said it is unclear what effect the tax changes will have on the economy because many of them expire in order to comply with Senate rules.
“The long-run outcome of this is ambiguous ... it’s really far from clear,” Prakken said. “By the end of 10 years, the GDP is very little changed.”
The Republican-led House approved a similar bill last month in what has been a stunningly swift trip through Congress for legislation that impacts the breadth of American society and is hundreds of pages long. The Senate measure still has to be reconciled with the House version before it can be sent to President Trump’s desk.
After spending the first nine months of the year futilely trying to repeal President Barack Obama’s health care law, GOP leaders were determined to move the tax overhaul rapidly before opposition Democrats and lobbying groups could blow it up. The party views passage as crucial to retaining its House and Senate majorities in next year’s elections.
Prior to this morning’s vote, Republican leadership claimed victory and enough votes to pass their bill, even as it was still being finetuned.
“We don’t usually think of members of Congress being willing to say they’re going to vote for something without an underlying piece of legislation that everyone has seen,” said Molly Reynolds, a fellow at the Brookings Institution in Washington, D.C. “I would definitely call it atypical.”
Reynolds said the speed at which the tax measure has gone from the House of Representatives to passing the Senate is remarkable.
“They have decided that it’s really important for them to get a big political win before the end of the year,” Reynolds said.
Democrats widely panned the bill, saying it would hurt most Americans.
“Every time the choice is between corporations and families, the Republicans choose corporations,” said Senate Minority Leader Chuck Schumer (D-N.Y.).
The Democrats were joined by at least one Republican in criticizing the bill: Gov. Charlie Baker.
“Governor Baker has serious concerns about the impact eliminating the state and local tax deduction would have on Massachusetts families and hopes the federal delegation will work with their colleagues to prevent policies that would negatively impact the Commonwealth,” Baker spokesman Brendan Moss said in a statement.