The New York Times is out this morning with a good overview of what is in the GOP’s final tax bill up for vote likely next Tuesday, here and here. The bill can be summarized as follows, in descending order of priority:
- Multi-national corporate tax cut & reform: The US corporate tax rate falls from 35% to 21%, and the code moves to a territorial system that leaves profits earned overseas free from tax upon repatriation.
- Pass-thru business tax cut & reform: Couples can now take a 20% deduction on up to $315,000 of qualifying pass-thru income (begins to phase out after $315,000), effectively decoupling pass-thru from ordinary income.
- Individual tax cut & reform: Individuals receive a modest tax cut on paper, but due to the capping of the SALT deduction at $10,000 the ultimate size of the cut, if any, varies by state.
Because the Democrat Party in its current form does not have a coherent economic agenda, and hates President Trump, the hyperventilation over the GOP’s tax bill is quite heavy. (By mathematical definition the top 1% of income earners will always receive the bulk of a tax cut, thus it will always “pay” for those who oppose a tax cut to argue the “rich” are receiving an unfair share. Just as the Republicans idiotically argue in the opposite direction, it is incoherent to compare an income bracket to the percentage of income earned. But such is the state of our disastrous political discourse.) But there are two significant negatives that I believe could have easily been avoided:
- Individual tax code simplification: The GOP really, really dropped the ball here by leaving seven brackets in place. It is quite shocking, actually, that this was allowed to occur, as it was a lay-up for simplification purposes. That whole postcard thing. Unbelievable.
- Child tax credit: As outlined yesterday, it would not surprise me if Rubio was blackmailed into aggressively pushing for a welfare transfer payment scheme that has nothing to do with tax code simplification or economic growth. For Heaven’s sake the family tax credits begin phasing out for a couple earning $400,000. Again, unbelievable. (I am all for a jobs/growth-friendly child care welfare payment, up to say $150,000 for a couple – but that is a bipartisan discussion to be had outside of taxation, as it is a welfare payment along the lines of social security.)
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For reference, the new brackets: