The Precarious Fate of Trump’s Tax Plan


President Trump meets with members of the House Ways and Means Committee in Washington on Sept. 26. (Shawn Thew / EPA)

The notion of tax cuts to the Republican Party is what Dancing Queen is to ABBA. Whenever attention is waning and people start to make their way to the exit, they can break this out and everyone is going to sing along. After multiple losses stemming from the Obamacare repeal, congressional Republicans are scurrying around the halls of the Capitol, desperate to pass a bill of some significance by year’s end. Their solution to recapturing their base’s attention is to heavily back President Trump’s tax plan. The Senate’s version was unveiled last Thursday in response to a tumultuous reaction to the House’s version.

The disparate bills highlight the distinct political pressures that Republicans in both chambers face, and what they are willing to do to ensure its passage. While both bills share the central line of reducing corporate tax and individual taxes, they differ on matters of sensitivity, especially from prudent and vulnerable House Republicans from highly-taxed states and Senate Republicans who take issue with adding to the federal deficit. They will have to come together over the plans pièce de résistance: a cut in the corporate tax rate from 35 percent to 20 percent in an attempt to collect and repatriate foreign holding of American companies.

After considerable public criticism, the Senate unveiled its own version of the House tax bill in an effort to curtail public pressures by reinstating some of the more popular tax breaks for mortgage and medical expenses. However, it nonetheless delayed the introduction of the new corporate tax that Republicans have been relying on to balance their projected fiscal figures. The most notable but least recognized alteration is the complete doing away with of SALT deductions for state and local taxes. Supporting this specific aspect of the bill is a completely untenable position for vulnerable blue state Republicans like Congressman Darrell Issa (R-CA) and Congresswoman Elise Stefanik (R-NY), whose constituents are the biggest deduction beneficiaries.

By far, the biggest losses were felt by those 44 million people who take advantage of the SALT deduction, as well as the projected 31 percent of middle-class households that will see their taxes increase. The biggest winner is undeniably American business. Not only will multi-national corporations see a tax decrease from 35 percent to 20 percent, but their dreams of redefining taxable income have finally come true. No longer will income made worldwide be the basis of taxation. Instead, a territorial system will be put in place that will only take revenue made domestically into account. Small businesses receive some of the benefits as well. A large percentage (approximately 95 percent) of American businesses are set up as “pass-through” entities such as LLCs and partnerships. These companies are exempt from a federal income tax. Rather, the owners are taxed individually in an effort to avoid double taxation. With the new Senate bill, they would be able to deduct 17.4 percent of their income – tax free, of course – earning the acclaim of the National Federation of Independent Business as it being a relief for small business, and thus providing justification for the change.

As the year comes to a close and no lasting legislation made by a party who owns both chambers of Congress and the seat behind the resolute desk, a failed passage of this tax plan would decimate any hope that could possibly remain for a competent legislative GOP. And so we hold our breaths and wait, and pray that we don’t pass out from anticipation as medical expenses may no longer be deductible.



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