Significant Differences in Senate vs House Tax Overhaul Plan: Will Anything Get Done This Year?
The Wall Street Journal reports Senate Tax Plan Differs From House on Individual Rates, Timing of Corporate Rate Cut.
Two Votes to Spare
With only a 52-48 majority Republicans can afford to lose at most two votes in the Senate. In that case Vice President Mike Pence would break a tie.
The House added to budget negotiation difficulties by bumping up taxes on multinational corporations and exempting car dealers from a limit on interest deductions.
Exempting car payment interest? Really? What on earth for?
Greg Valliere, chief global strategist at Horizon Investments accurately sums up the situation: “There isn’t enough money to pay for everything that each house wants. Something has to give, most likely corporate tax relief, which may not be as generous as proponents expected a few weeks ago.”
The Senate must abide by the Byrd Rule. That's a requirement that the overhaul cannot increase deficits beyond the first 10 years.
Of course, no one can accurately predict such things in the first place. Nonetheless, if the non-partisan Congressional Budget Office makes that determination, the bill requires 60 votes to pass.
And right now we can say House Bill Does Not Meet the Byrd Rule.
The Tax Cuts and Jobs Act will add $155 billion to the deficit in 2028, the year after the 10-year budget window ends in 2027.
One dramatic option for making the tax bill Byrd-compliant would be to let some portion of the corporate and individual tax cuts sunset and expire after 10 years.
Allowing the corporate rate to sunset would not be an attractive option for Republican lawmakers. CRFB notes that some conservative leaning think tanks have said doing so would undermine business investment, and potentially be more anti-growth than no cut to the corporate rate.
Making individual tax cuts temporary, as was done under the Bush administration, would also be politically perilous, as it would amount to a tax increase for households in the foreseeable future.
Other Byrd Rule Violations
The Hill note other Byrd Rule Violations.
The House Bill “generates $74 billion in 'off-budget' revenue for Social Security, including $53 billion in additional revenue from certain business income being reclassified as wage income as well as other smaller provisions increasing the amount of taxable wage income. The Senate Parliamentarian may rule some of these provisions to be direct enough changes to the Social Security payroll tax that they cannot remain in the legislation without it losing privilege."
Seven Tax Brackets
The House plan had only four tax brackets, The Senate version has seven.
Questions of the Day
Will the resultant sausage benefit the middle class or will it just just shift some winners and losers around a bit?
Mike "Mish" Shedlock