White House tax talk: Two bills and a sudsy metaphor

Las Vegas Review-Journal (Sunday) - - FRONT PAGE - By De­bra J. Saun­ders Re­view-Jour­nal White House Cor­re­spon­dent

WASH­ING­TON — White House press sec­re­tary Sarah San­ders found a clever way to com­bine two pas­sions — tweak­ing re­porters and supporting big tax cuts — dur­ing a re­cent press brief­ing.

She laid out a sce­nario in which 10 re­porters had a beer to­gether ev­ery day and paid the $100 tab un­der a mech­a­nism akin to the fed­eral in­come tax sys­tem. Four re­porters paid noth­ing, while the high­est-paid jour­nal­ist kicked in $59. When the bar pro­pri­etor de­cided to cut prices, and the scribes

cal­cu­lated how to spread the sav­ings, the high­est-paid re­porter en­joyed a $10 wind­fall, the other five journos who paid en­joyed smaller sav­ings, and the four who drank free gained noth­ing.

“Why should he get $10 back?” nine re­porters com­plained, be­cause they saved far less or noth­ing at all.

San­ders’ cau­tion­ary tale had laid out how any tax cut should be ex­pected to ben­e­fit the wealthy the most, be­cause af­flu­ent peo­ple pay the most taxes. The night af­ter the rest of the pack com­plained, the top-paid jour­nal­ist didn’t show, and the re­main­ing nine could not af­ford their brews.

The Se­nate re­leased its Tax Cuts and Jobs Act late Thurs­day, which an­a­lysts are busy com­par­ing to the com­pan­ion House bill. But the crux of the op­po­si­tion es­sen­tially is the same for both bills, and it mir­rors the nine jour­nal­ists’ lament in San­ders’ al­le­gory: Peo­ple who pay more taxes will get a big­ger break than those who pay less or noth­ing.

Thus Se­nate Mi­nor­ity Leader Chuck Schumer, D-N.Y., de­scribed the Se­nate mea­sure as a ve­hi­cle “grounded in tax cuts for big cor­po­ra­tions

and the very rich. They ac­tu­ally hurt mid­dle-class peo­ple be­cause they need to give those big breaks for the wealth­i­est.”

Both the House and Se­nate bills would re­duce the U.S. cor­po­rate tax rate from 35 per­cent to 20 per­cent to take away the tax dis­ad­van­tage of do­ing busi­ness in the United States. The av­er­age cor­po­rate tax rate of coun­tries in the Or­ga­ni­za­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment is 24.1 per­cent.

The House bill would cut cor­po­rate taxes start­ing next year. The Se­nate bill would de­lay the cor­po­rate tax cut un­til 2019 in an ef­fort to limit the mea­sure’s con­tri­bu­tion to the na­tional debt to $1.5 tril­lion over 10 years.

Tom Camp­bell, a for­mer GOP con­gress­man who teaches law and eco­nom­ics at Chap­man Univer­sity, chided Schumer for talk­ing about wealthy cor­po­ra­tions “as a pe­jo­ra­tive.” Those com­pa­nies, said Camp­bell, hire Amer­i­can work­ers and pay U.S. taxes.

Tax Foun­da­tion se­nior pol­icy an­a­lyst Jared Wal­czak ac­knowl­edged that both the Se­nate and House tax bills would present a boon for wealthy fam­i­lies as they in­vest their as­sets in the U.S. mar­ket­place. Then again, he said, those cuts are likely to im­prove eco­nomic growth in the

United States and thus boost wages.

When it comes to treat­ment of per­sonal in­come taxes, how­ever, Wal­czak said the GOP plans truly “are fo­cused on mid­dle-class tax re­lief.”

Camp­bell agreed. He cred­ited one big-ticket item – dou­bling the stan­dard per­sonal de­duc­tion to $24,000 for a house­hold.

Credit Pres­i­dent Don­ald Trump for sig­nal­ing to Capi­tol Hill that he wanted a bill that fo­cused on cre­at­ing jobs and cut­ting taxes for the mid­dle class.

The Tax Foun­da­tion es­ti­mated that, if the Se­nate bill were to pass, it would cre­ate 8,316 jobs in Ne­vada and in­crease av­er­age af­ter-tax house­hold in­come by $2,439 over 10 years.

On per­sonal in­come taxes, nei­ther of the two mea­sures is writ­ten to fa­vor the high­est earn­ers. The House ver­sion doesn’t lower the 39.6 per­cent rate on top earn­ers — it even pro­poses a “bub­ble rate” for top earn­ers. That would be a tax hike on peo­ple who al­ready pay the high­est tax rate.

The Se­nate plan re­duces the top rate by a lit­tle over one per­cent­age point, to 38.5 per­cent, but its elim­i­na­tion of key de­duc­tions is ex­pected to erode or over­take those sav­ings.

Camp­bell crit­i­cized plans in both

bills to ei­ther cut or elim­i­nate state and lo­cal tax de­duc­tions, as well as the House pro­posal to limit in­ter­est de­duc­tions to $500,000 prin­ci­pal. Those pro­pos­als would hurt peo­ple who work in or own moder­ately priced homes in states like Cal­i­for­nia, New York and New Jer­sey. Wealthy res­i­dents also would get dinged.

Both plans pro­pose to re­duce es­tate tax rev­enue by dou­bling the amount ex­empt from tax­a­tion to $10 mil­lion. Camp­bell ar­gued that is wrong, be­cause too few house­holds would ben­e­fit from that change. The House bill goes even fur­ther — by pledg­ing to elim­i­nate the tax in six years. But on in­come taxes, the fo­cus is on the mid­dle class.

On Fox Busi­ness News, an­chors are grous­ing about a tax hike for top earn­ers. “Looks like Repub­li­cans wrote the busi­ness side, but it sure seems like Democrats wrote the new rules for in­di­vid­u­als,” an­chor Ste­wart Var­ney ar­gued.

That doesn’t mean that some top earn­ers won’t net more dol­lars than mid­dle-class house­holds, and San­ders ex­plained why.

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