By State Representative, Leon D. Young
The clock is ticking, and time is running out if Republicans are to be successful in ramming through their major overhaul of the federal tax code before the end of the year. After much delay, and shrouded in secrecy, House Republicans finally unveiled its massive tax reform package last Thursday.
House Ways and Means Committee Chair Kevin Brady, the author of the tax bill, indicated that the House should pass the plan by Thanksgiving. And, according to Brady, the bill would add $1.51 trillion to the federal deficit over the next 10 years. It should be noted that the reconciliation framework in the recently passed budget resolution allows for the bill to add $1.5 trillion to the deficit over 10 years.
Brady, House Speaker Paul Ryan, and other House GOP leaders touted the bill in a press conference on Thursday and argued it would save the average family of four $1,182 a year on their taxes. Here are some of the legislation’s key proposals:
• The highest tax bracket would remain at 39.6%: According to reports, the plan would propose a fourth marginal tax bracket on high-income earners. It will reportedly apply to married couples making more than $1 million a year.
• New individual tax brackets:
o 12%: Applies to incomes up to $45,000 for an individual and $90,000 for a married couple.
o 25%: Applies to incomes up to $200,000 for and individual and $260,000 for couples.
o 35%: Applies to incomes up to $500,000 for an individual and $1 million for couples.
o For single parents that are heads of households, the thresholds would be the midpoint between individuals and joint filers, expect for the highest bracket which would still kick in at $500,000.
Not to be outdone, Senate Republicans also outlined their vision on Thursday for overhauling the tax code, proposing a one-year delay in President Trump’s top priority of cutting the corporate tax rate while reinstating some prized tax breaks used by middle-class families.
The Senate bill differs significantly from the House version approved by the Ways and Means committee on Thursday:
• It would preserve some popular tax breaks, including ones for mortgage interest and medical expenses, and would maintain a bottom tax rate of 10 percent for lower earners.
The disparate bills show the competing pressures that Republican lawmakers are facing and the calculations that Senate and House leaders are making to ensure passage of the bills through their respective chambers. While both bills share the main priorities of cutting corporate and individual taxes, they diverge on matters of high political sensitivity, particularly for vulnerable House Republicans from high-tax states and for Senate Republicans concerned about adding to the federal budget deficit.
Let’s give credit where credit is due: The tax reform bill that Senate Republicans revealed last week is less of an egregious giveaway to the very wealthy than what’s being concocted in the House of Representatives. Contrary to what some headlines have suggested, however, the biggest winner under the Senate’s plan is not the middle class. Far from it.
The legislation still favors the rich — particularly those who stand to benefit from corporate tax cuts — and millions of ordinary households either won’t get much in the bargain at all or will end up owing more to the IRS than they do now. However, in the final analysis, both plans are just the latest examples of the Trojan horse that Republicans are desperately trying to advance.