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No Draft in Sight as Senate Pushes Ahead With GOP Tax Bill

Having generated several hundred amendments already, the latest version of the tax bill was not ready in time for Tuesday morning’s meeting of a Senate committee that will finalize it.

WASHINGTON (CN) - Having generated several hundred amendments already, the latest version of the tax bill was not ready in time for Tuesday morning’s meeting of a Senate committee that will finalize it.

"Because of a large number of amendments that we have processed, the modified mark will be given to members later today," Sen. Orrin Hatch said as he opened an executive session of the nonpartisan Joint Committee on Taxation to study the bill released Thursday by the Senate.

Hatch, who chairs the Senate Finance Committee, said committee members can review the changes and address them during a markup of the bill scheduled for Wednesday.

Before reports emerged later Tuesday that Republicans shoehorned their effort to repeal the individual mandate of the federal health care law into the tax bill, Sen. Ron Wyden criticized the committee’s "reckless haste” in plowing ahead with an otherwise blind review.

"This is trying to make fundamental tax reform on the fly," said Wyden, an Oregon Democrat.

The individual mandate under the Patient Protection and Affordable Care Act imposes a tax penalty for those who go without health insurance.

Without the mandate, which helps keeps costs lower for everyone by boosting enrollment of younger, healthier individuals who spread cost across risk pools, health-policy analysts have said premiums could spike.

The Congressional Budget Office estimates that 13 million fewer people will buy insurance without the mandate, freeing up $300 billion in government funds over the next decade that previously funded insurance subsidies.

Prior to announcement of the mandate’s repeal Tuesday by Republican leaders, the Senate Finance Committee debated a tax-overhaul plan without the health care measure.

President Trump paved the way for the maneuver Monday with a tweet at end of his Asia trip that suggested adding the measure to the tax proposal.

According to analysis from the Joint Committee on Taxation, the tax plan includes cuts for more than half of U.S. households, but about 9 percent would see a hike, and the rest would see a change of less than $100.

Both the Senate and House plans would increase the federal deficit by $1.5 trillion over the first decade.

The Senate bill would double the standard deduction, deeply cut the corporate tax rate, and repeal the federal deduction for local and state income taxes and property and sales taxes.

Democrats say that it’s a transparent tax cut for business on the backs of the middle class, with Wyden calling it a "loophole bonanza" for multinational corporations that want to "game the system," allowing them to skirt the new rules and making it more attractive to do business overseas.

One issue he pointed to is the proposed cut to the corporate tax rate, which would drop from 35 to 20 percent.

"We could wind up encouraging companies to ship even more profits offshore," Wyden said.

Sen. Rob Portman, R-Ohio, challenged those assertions, saying that problem exists now.

"It's quite simple, right now, there is an incentive to go overseas," he said. “The outsourcing is happening.”

In Portman’s view, the decreased tax rate would reduce the incentives for corporations to move their operations overseas, and would allow them to deduct equipment investments from taxable income, providing another draw to invest operations in the U.S.

Republicans say that could be a boon to the American economy.

Thomas Barthold, chief of staff for the Joint Committee on Taxation, said the Senate plan would incentivize corporations to move their earnings back to the U.S. for reinvestment. But, he added, they would still be free to move them to any other location in the world.

Sen. Debbie Stabenow, D-Mich., asked Barthold if any provision in the bill would end the cut on the corporate tax rate for companies that fail to create the jobs that President Trump and Republicans have promised, or if more jobs end up overseas as a result of the proposed legislation.

Barthold said that tax rate is permanent, regardless of other actions or indicators.

Democrats also took issue with a deduction in the Senate proposal for pass-through entities - sole proprietorships, partnerships, S corporations and LLCs - that are not subject to corporate income tax.

Instead, their profits "pass through" to their individual returns. That income is taxed now at rates up to 39.6 percent.

Scott Grerenberg with the Tax Foundation said the deduction proposed in the Senate plan would allow those with pass-through business income to deduct 17.4 percent of it from taxes, and would lower the top tax rate they would pay from 38.4 percent on wages to 31.8 percent.

Under the plan, foreign income wouldn't qualify, and service businesses wouldn't be eligible, except for those with incomes below $75,000 for individuals and $150,00 for married couples.

Wyden prodded Barthold about whether companies would be encouraged to ship more profits offshore.

Barthold replied: “Incentives might be substantially different from what they are today.”

Sen. Claire McCaskill , D-Mo., called the pass-through deduction "nuts."

Posing a question to Barthold, McCaskill asked if a single dentist who earns $110,000 per year would be eligible.

"No, Senator," Barthold replied.

"Would a casino developer that reports business income of $1 million annually be eligible for the pass-through deduction," McCaskill continued.

"Uh, yes, senator," Barthold said.

"It's nuts the way this is done," McCaskill said.

Categories / Business, Financial, Government, Politics

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