OOPS! Senate GOP's panic means bigger deficits, changes for tax scam

Now that the hand-written junk that got slapped onto the Senate GOP’s tax bill is being printed and evaluated, people who do taxes for a living are seeing things that not even the GOP wanted in the bill. And it could drive the price tag of this thing a lot higher than the $1.45 trillion that it was already going to cost us.

Some of the provisions could be easily gamed, tax lawyers say. Their plans to cut taxes on “pass-through” businesses in particular could open broad avenues for tax avoidance.

Others would have unintended results, like a last-minute decision by the Senate to keep the alternative minimum tax, which was designed to make sure wealthy people and corporations don't escape taxes altogether. For many businesses, that would nullify the value of a hugely popular break for research and development expenses.

Some provisions are so vaguely written they leave experts scratching their heads, like a proposal to begin taxing the investment earnings of rich private universities’ endowments. The legislation doesn’t explain what’s considered an endowment, and some colleges have more than 1,000 accounts.

In many cases, Republicans are giving taxpayers little time to adjust to sometimes major changes in policy. An entirely new international tax regime, one experts are still trying to parse, would go into effect Jan. 1, only days after lawmakers hope to push the plan through Congress.

“The more you read, the more you go, ‘Holy crap, what’s this?'” said Greg Jenner, a former top tax official in George W. Bush’s Treasury Department. “We will be dealing with unintended consequences for months to come because the bill is moving too fast.”

Reinstating the corporate AMT in this bill would basically have the effect of a 20% flat tax, which doesn’t sound so bad to me (although I think the rate should be higher), but probably doesn’t work well with the Koched-up GOP caucus. Indeed, House Majority Leader Kevin McCarthy says in the Politico article that the corporate AMT “should be eliminated, for sure.”

But there’s a problem there - getting rid of the corporate AMT would take this tax bill well above the $1.5 trillion limit for deficits over 10 years. Part of that comes from removing the research and development credit, (a move that also harms the country’s economic competitiveness) and Slate’s Jordan Weissmann says that the idea of “bringing profits back home from overseas” would go by the wayside if the Senate GOP’s bill were to stay in its present form.

Without getting too stuck in the weeds, the GOP’s bill was supposed to take the U.S. from a “worldwide” system of taxation, where the IRS tries to take a cut of profits American companies earn anywhere on the globe, to a modified “territorial” system, where companies could bring back their profits either tax-free or at a much lower rate. With the AMT still kicking around at 20 percent, though, “the United States would continue to operate under a worldwide system of taxation,” the lawyers [from Davis Polk] wrote.

Keeping the AMT was supposed to raise $40 billion, but that already appears to be a gross underestimate. (The figure came from Congress’ Joint Committee on Taxation, whose analysts I can only assume were running on Red Bull and fumes while trying to provide the GOP with last-minute scores.) NYU Law professor and tax expert Lily Batchelder concludes that the AMT will actually cost companies at least $329 billion—good for limiting the blow to the deficit, bad for the corporations who are supposed to be stumping for this legislative Frankenstein—just based on the value of the R&D credits and international exemptions that have been rendered useless.

I’m getting >$300B from fact that provision appears to repeal R&D credit, which costs ~$113B, and participation exemption, which costs $216B. See JCT estimates at https://t.co/odhMFYTc68 and https://t.co/dcffBY0NKb. 2/5

— Lily Batchelder (@lilybatch) December 6, 2017

So in addition to the numerous other provisions that already made this tax scam a Piece of Shit, now there will be a mad scramble to raise another $300 billion just to make it possible for the Senate to pass the bill with 50 votes because rushing a bill with hand-written notes through turned out to miss some details (who knew!).

And now the slimy Turtle who heads up the Senate GOP says another major change may be in the cards just to get this thing to go through.

Senate Majority Leader Mitch McConnell (R-Ky.) says he’s open to making a provision on state and local tax deductions more generous to win over House Republicans when the two chambers merge their tax bills in the coming weeks.

Some House Republicans, particularly from high-tax states such as California, want language that would allow taxpayers to deduct up to $10,000 of either their property or state and local income taxes. Both the Senate and House bills include the property tax provision, which was aimed at winning support from GOP lawmakers from states such as New Jersey and New York…

The fate of the overall deduction, commonly referred to as SALT, has been an issue for months.

House Republicans from California are concerned eliminating the income tax portion of the writeoff could become a net tax increase on some of their constituents. Several voted for the House tax reform bill on the promise that more would be done to fix it.

Now that the chambers are preparing to go to conference, California Republicans want more federal tax relief for residents of the state, which has the highest state income tax rate in the country. Californians would not benefit as much from the bills' current language to deduct property taxes because the state already caps its property taxes.

Which sounds nice, except that I see nothing in the article that says the $10,000 limit that the property tax writeoff has gone away, so the effect would be limited and still likely lead to many tax increases on individuals (including in Wisconsin, where a lot of us take SALT). And even if allowing state + local income taxes to be the write-off does lower taxes for lot of people, it means that the deficit likely goes over the limit, meaning there’s ANOTHER place that GOPs will have to find an offsetting tax hike.

As I’ve mentioned before , the increased standard deduction likely limits the amount of people who would take SALT or any other deduction, especially a SALT deduction limited to $10,000. While that might mean lower taxes for some people, it also means that write-offs for home ownership don’t get used, and would likely lead to a decline (if not outright crash) in the housing market. It doesn’t matter if you’re paying lower or simpler taxes if the economy and your assets go down the tubes, as it likely would under this Piece of Shit.

So yeah, they got a lot of work left to do in DC to get a bill that can even be considered on the floors of both houses in Congress. Which means that this Piece of Shit can definitely still be shot down, or at least have a much less regressive and destructive effect than the current garbage does. With that in mind, I’ll forward you to an event that Indivisible Madison is holding on Saturday at Library Mall in Madison if you want to come out and be heard.

Combined with a government shutdown looming for this weekend (one that Dems should allow to go on until our compromised President releases his own taxes, by the way), and the floundering of GOP “governance” in DC is both absurd and dangerous.

But why should we be surprised at this? The 2017 GOP is nothing more than an unholy alliance between rich a-holes, fundies, racist rednecks, and other self-absorbed twits. They all gotta be gone ASAP, and be kept out for a LONNNNG time.