Throughout the campaign, Trump said he craved a “middle-class tax cut, ” one that wouldn’t benefit wealthy person like him and would spur huge levels of economic growth while not adding to the national debt. “For the hedge fund guys, they’re going to be paying up, ” Trump promised in September 2015 .
As president, Trump has continued to insist the tax code modernise won’t be good for himself or other millionaires. “This is going to cost me a fate, this thing — believes me, ” Trump said this week.
But the big winners in the GOP bill that the Senate passed early Saturday morning are corporations and the wealthy. Trump himself — a self-proclaimed billionaire — stands to gain millions through the elimination of certain taxes( though we don’t know exactly how much because Trump won’t release his tax returns ). Far from being a middle-class tax cut, the measure is a massive corporate giveaway, a bill that recycles decades of Republican ideology on trickle-down economics and trusts that executives will hand over their new gains to average-income workers.
“If my friends here want to give a taxation cut to the middle class, ” Sen. Sherrod Brown( D-Ohio) asked on the Senate floor Thursday, “why don’t we give a tax cut to the middle class? ” His argument had no effect.
After months of negotiations, the Senate passed project proposals, 51 -4 9, with simply one Republican — Bob Corker of Tennessee — joining all Democrats in opposition. Corker took issue with how much indebtednes the bill would make, and after the Senate parliamentarian struck down Corker’s debt-control proposal, GOP presidents invited the retiring Republican to merely vote no rather than find him an accommodation.
With the bill ultimately through the Senate — the House passed its taxation bill two weeks earlier — the two chambers still have to work out their legislative differences in a seminar committee before the tax rewrite becomes statute. There’s a slim chance the House could adopt the Senate bill and mail it to the president’s desk, but it’s more likely that negotiators will merge the two versions. Both chambers need to pass the same measurement for the bill to become law.
For most Americans, the legislation is still indeed — at least in the short term — a tax cut. Those cuts are due in big component to Republican approving $1.5 trillion in added debt in the course of the coming 10 years. But of that tart, the wealthy disproportionately advantage, and some households could wind up with higher taxation bills. The richest 20 percentage of households reap 90 percent of the well being of the tax cuts over that time period, according to the nonpartisan Tax Policy Center.
Still, in the short term, it’s difficult to say precisely whose taxes move up and whose go down. Tax burdens depend on what allowances individual filers claim, and this bill is a complicated taxation code revision — one that analysts say will have limited impact on the economy, will cost the commonwealth more than a trillion dollars over the next 10 years, and will do much more for rich investors than it will the middle class.
Despite all that, despite poll after poll showing the measure is unpopular, most Republicans were ecstatic to pass the bill.
While the bill took months to draft, the final bundle came together over a frenetic last few days. Republicans didn’t even have finished legislative text until Friday night, hours before the voting rights, and Democrats slammed their GOP colleagues for rushing through a bill that was cobbled together with handwritten the modifications and crossed-out pages at the last minute.
Those procedural fears did nothing to slow the bill, nonetheless, with Republican falling in line to vote down a Democratic motion to adjourn Friday night. Senators then began a so-called vote-a-rama, in which amendments get up-or-down acceptance one after the other until lawmakers are exhausted enough to stop. Eventually, in the early hours of Saturday morning, senators moved to a final vote on the reconciliation bill, and it passed.
To get the bill over the 50 -vote threshold for reconciliation legislation, GOP leaders cut deals this week on how much certain business could deduct off the top of their taxation bills, as well as on what would be included in an upcoming government fund measuring.
Sen. Susan Collins( R-Maine ), for example, demanded that year-end spending legislation include funding for Obamacare subsidies that the Trump administration has targeted. Sen. Jeff Flake( R-Ariz .) said he got assurances on a contentious immigration program, Deferred Action for Childhood Arrivals, though Trump administration officials said Flake only got assurances on being part of the conversation.
Overall, the legislation would cut the corporate tax rates from 35 to 20 percent, which has been the GOP’s priority all along. Republican say this dramatic reduction will unleash economics and create wages by making big businesses more internationally competitive — claims that are dubious according to corporate executives themselves, who say they will throw the money at shareholders instead of workers.
In addition to reducing corporate and individual tax rates across the board, the bill would simplify the tax code by getting rid of most allowances, which businesses and individuals use to reduce the amount of their income subject to taxation.
Because Congress over the years has added write-offs in order to encourage and subsidize certain endeavors — such as homeownership and higher education — the mass removal of these taxation predilections could have wide-ranging impacts that are incidental to the overall Republican goal of encouraging business investment.
Axing allowances for country and local taxes, for example, while increasing the value of a fixed “standard deduction, ” would result in far fewer households seeing it worthwhile to deduct the amount they spend on mortgage interest. A investigate commissioned by the National Association of Realtors earlier this year said the proposal would reduce home values by 10 percentage( which could be a good thing for people who don’t already own homes ). Republican have long championed homeownership but ought to have undeterred by a lobbying blitz from the real estate industry.
While fewer allowances stimulates for a simpler tax code, the bill would also create a complicated new deduction for certain business that aren’t taxed as corporations. Deciding which firms have the kind of “qualified business income” eligible for the allowance will require many pages of new IRS regulation, though the bill explicitly excludes high-income service providers like accountants, lawyers and investment managers.
In the day before the final vote, Republicans increased the value of the deduction to win over Sens. Ron Johnson( R-Wis .) and Steve Daines( R-Mont .), both of whom has hitherto withheld subsistence since they are felt the legislation disproportionately benefited firms that pay the corporate tax.
And in a catchall “manager’s amendment” adopted just before the bill passed, Majority Whip John Cornyn( R-Texas) added a provision to allow publicly traded partnerships to claim the new allowance. Victor Fleischer, a taxation prof at the University of San Diego School of statute, said that the Cornyn amendment would specifically benefit oil and gas companies.
“We should all re-read’ Why Nations Fail’ after such a tax bill pass, ” Fleischer said on Twitter.
Another provision in the manager’s amendment, inserted by Sen. Pat Toomey( R-Pa .), would have exempted schools that don’t take federal monies, such as the conservative Hillsdale College in Michigan, from a new taxation on college and university endowments. The tax seems designed less to raise money than to poke educated liberals in the eye. Several Republican joined Democrat in defeating the amendment. Toomey’s office did not respond to a request for comment.
To keep the cost of the bill beneath $1.5 trillion — an arbitrary level Republicans defined for themselves in a budget process earlier this year — virtually all of the tax cuts for individuals expire at the end of 2025. Republicans say that expiration won’t happen , noting that even President Barack Obama induced virtually all of the Bush tax cuts permanent when they were up for reauthorization.
But for all the GOP bluster about this bill being a taxation cut for the middle class, and for all the rhetoric about the false necessity of stimulating taxation cuts permanent, the bill would keep the corporate tax rates the same while putting the individual rates up for expiration. Because of those temporary cuts, the Joint Committee on Taxation, which scores tax legislation for Congress, found that most households earning less than $75,000 annually would pay higher taxes 10 years from now.
Just before debate began Friday night, Sen. Bernie Sanders( I-Vt .) said on the Senate floor that this day would be remembered as one of the “great robberies in U.S. history.”
CORRECTION : An earlier version of this story incorrectly reported that Toomey’s Hillsdale carveout had been adopted. This tale has also been updated to clarify which industry Fleischer says would benefit from Cornyn’s amendment.