Senate Passes Controversial Tax Legislation

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Grace Fiori, Editor

The tax reform bill, called the Tax Cuts and Jobs Act, has created bipartisan waves recently after being passed December 1st, with a narrow vote of 51 to 49. Rolled out last week by members of the Republican Congress, the legislation was revised and edited up until the vote. The bill itself has been disliked by both conservatives and democrats in Congress, and was polling low, as further analysis of the tax bill shows that corporations are favored more than individuals.

In order to gain support for the bill, Republican leaders made many concessions to gain the votes of their hesitant Republican colleagues. However, even though it was unknown up until the vote, the decision of many senators, Bob Corker, of Tennessee, was the only Republican who opposed the bill. This is seen as a huge victory for Mitch McConnell and members of the Senate GOP, who have been unsuccessful in gaining support for their last attempted legislation, a repeal of the Affordable Care Act.

The House also passed it’s version of the act on November 16th. A conference committee has now formed to meld the two bills together and reach a final article to be passed on to the White House for final approval. There is the hope that the bill could be finalized before Christmas, and go into effect by January 1st.

The tax bill was a rushed, fast-paced push of legislation, as the Republicans are trying to push the plan as fast as possible to avoid opposition and to create solid grounding for 2018 elections. This push could lead to serious problems. Not only are parts of the bill being changed by hand as delegations take place, but the traditional time allotted for the changeover of one tax rule to another was essentially abandoned, giving the public very little time to adjust and react to the changes. There is a high possibility of confusion, of possible misinterpretation, like in the system to cut taxes in “pass through” businesses, where taxes are paid on an individual owner level. While many assume these are small businesses, not all are, and in this way large groups could pay less taxes.

The rush of the tax bill has many worried. Politico spoke with Greg Jenner, a former top tax official during George W. Bush’s administration, who said, “The more you read, the more you go, ‘Holy crap, what’s this? We will be dealing with unintended consequences for months to come because the bill is moving too fast.”

An overview of the bill shows that there are permanent tax breaks for corporations and only temporary cuts for individuals. The Senate bill itself is designed so that major changes begin in 2019, starting with cutting the corporate tax rate from 35 to 20 percent. Along with the House bill, the plans eliminate personal exemptions, increase the standard deduction, the monetary amount that could be the amount of taxable income.

In short, the bills lower tax rates for corporations and the wealthy and increase taxes for those with lower incomes. The tax bill would also add almost $1.5 trillion to the deficit, and even though it will increase the U.S. with economic gains, the balance would still end at $1 trillion. Essentially, while the tax bill does increase economic growth, it is not enough to cover the huge cost of the plan.

After the bill succeeded, President Trump tweeted, “We are one step closer to delivering MASSIVE tax cuts for working families across America.” Even though a new determination by the Joint Committee on Taxtion (JCT) shows that by 2019 only 44% of Americans would see their taxes reduced by more than $500. And as time goes on, this only worsens. By 2027 the JCT determined only 16% of Americans would get a tax cut of over $100.

While many Republicans, and the White House, continue to celebrate their success, the process is only beginning. It seems unlikely that the bill can be wrapped up in time for the holidays, especially with an impending government shutdown. Some conservatives are frustrated at the non-military related expenses, and Democrats are frustrated that there is no support for DACA, the protection program for illegal immigrants who entered the U.S. when they were children. This creates a standstill for budget approval. On top of those issues, differences between the House and Senate tax bills need to be solved and a vote needs to be held again. The Senate can only afford two “no” votes to continue, and Senator Corker has been adamant that he does not support the bill.  

As the year comes to end, it will be waiting game of whether Senate Republicans can truly join together and deliver the ‘a big, beautiful Christmas present’ Trump recently called the current tax plan.