Both Senate and House bills immediately increase taxes on millions of middle class families: Data from the Joint Committee on Taxation, Congress’ official tax scorekeeper, confirms that both the House and Senate bills immediately increase taxes in 2019 on nearly 13 million middle class families earning under $200,000.
Both Senate and House bills create an economic double standard: While tax relief for individuals is temporary in both bills, Republicans permanently slash tax rates for multinational corporations that ship jobs overseas. By 2023, the House bill repeals a key middle class tax credit. In the Senate version, all middle class tax relief vanishes by 2026. Data from the Joint Committee on Taxation, Congress’ official tax scorekeeper, confirms that these bills raise taxes in 2027 on at least 35 to 38 million middle class families earning under $200,000.
Both Senate and House bills double tax the middle class by partially repealing the State and Local Tax Deduction: The House and Senate bills both repeal the SALT deduction for income and sales tax, preserving only the deduction for $10,000 in property taxes. The State and Local Tax Deduction ensures the federal government can’t double dip by pretending working families still have the money they’ve already paid in state and local taxes – and then taxing it again. Over 86 percent of taxpayers claiming the State and Local Tax Deduction in 2015 made under $200,000. Tossing out the deduction would put massive strain on state and local budgets.
Both Senate and House bills create a pass-through loophole for millionaires: For so-called “pass-through” business, the House bill creates a special 25% tax rate and the Senate bill creates a special 23% deduction. Both proposals are harshly skewed toward those at the top, with only a fraction of the benefit seen by true small business owners. The top 1 percent of earners receive over half of all pass-through income.
Downtown lobbyists had a heavy hand in the development of the Senate pass-through deduction. The Senate bill provides opportunities for gaming the system. Republicans are calling for simplicity, but the proposed pass-through deduction creates a web of new complexities and leaves the door wide open for tax scheming and structuring by the accountants and lawyers of millionaires.
The House proposal is nothing more than a massive tax break for the wealthiest Americans, disguised as relief for small businesses. The huge difference between the pass-through tax rate and the top individual tax rate, coupled with the incredible complexity created by Republicans, will inevitably be greeted with gaming and tax cheating by millionaires. The House bill picks winners and losers. And who benefits most? Those not actually doing the work. Wealthy investors are the clear winners–not the entrepreneurs, the start-ups, the local businesses.
Both Senate and House bills break Donald Trump’s promise by preserving the carried interest loophole: Donald Trump promised over and over again during the campaign to close the infamous “carried interest” loophole, which allows Wall Street investment fund managers to slash their tax bills by disguising income as capital gains. But neither the House nor Senate bills close this loophole, instead tinkering around the edges with holding period requirements that do nothing to force Wall Street managers to pay their fair share and allows them to avoid paying payroll taxes on income that is compensation.
Both Senate and House bills slash the corporate tax rate, benefiting millionaires and wealthy shareholders: The House and Senate bills slash the corporate tax rate from 35% to 20%. 80 percent of corporate taxes are paid for by wealthy shareholders. A lower corporate rate would overwhelmingly benefit wealthy shareholders, investors, and powerful CEOs, not American workers. That’s why nearly 30% of the benefits from corporate tax cuts go to millionaires. Corporate CEOs admit they don’t plan on using their potential tax windfall to help workers — instead promising share buybacks and dividends.
Both Senate and House bills hand windfalls to multinational corporations that ship jobs overseas: By shifting to a “territorial” tax system, the House and Senate bills would let multinational corporations pay a bargain rate on overseas income they’ve artificially avoided paying taxes on. This is a failed experiment that will do nothing for American workers. In 2004, Congress gave multinational corporations a “repatriation holiday.” The result? Rather than increase hiring or investment in the United States, 92 percent of the money was used for share buybacks, dividends, and CEO bonuses. And a territorial system also encourages multinational corporations to ship jobs overseas to low-tax jurisdictions. As Senate Republican Ron Johnson admitted, “With a territorial system, there will be a real incentive to keep manufacturing overseas.”
Both Senate and House bills fall far short of meaningful tax relief for families with children: While the House bill increases the Child Tax Credit to $1,600 and the Senate bill increases the credit to $2,000, these plans leave behind millions of children in lower income working families. The Senate bill gives no more than a token tax benefit to 10 million children whose parents work for low pay. The House bill, meanwhile, entirely excludes 10 million children from its CTC expansion. This comes to 1 out of 7 children in working families being left behind by both Republican tax plans. And it’s not just children who Republicans short change. An estimated 500,000 veterans who are parents in working families wouldn’t receive the full CTC increase. More than 140,000 of these 500,000 veteran parents would get no more than a token tax benefit. As if this weren’t enough, both the House and Senate bills also directly take the Child Tax Credit away from families with “Dreamers” – undocumented immigrants who came to the U.S. as children.
Senate bill repeals a pillar of the Affordable Care Act to fund permanent corporate tax cuts: The Senate bill is an obscene transfer of wealth from the most vulnerable to the fortunate few. The bill is essentially a repeal of the Affordable Care Act, which, according to the official Congressional Budget Office, will increase the number of uninsured Americans by 13 million and result in 10 percent higher premiums each year than under current law. Republicans then turn around and use the money from low- and middle- class health benefits and Medicaid for a multi-trillion dollar giveaway to the top one percent and multinational corporations. And while Republicans put an expiration date on the meager middle class tax relief in the bill, the loss of health benefits plus the multinational tax boondoggles are made permanent law. Senate Majority Leader openly stated the purpose of repealing the ACA was to use “that revenue … to make permanent the corporate tax rate.”
Both Senate and House bills weaken the estate tax: The House and Senate bills would weaken the estate tax, providing a windfall for the wealthiest one in 500 estates. The Senate bill would double the estate tax exemption from $11 million per family ($5.5 million per person) to $22 million per family ($11 million per person). The House bill first doubles the exemption then would entirely repeal the estate tax after 2025. This tax cut would only benefit the wealthiest sliver of our society and would do virtually nothing to help small businesses and family farms.
Senate bill undercuts public education but creates a giveaway for private schools: By gutting the deduction for State and local taxes, the Senate bill undercuts State and local funding for K-12 education. State and local governments provide nearly 90 percent of funding for primary and secondary education, and almost half of the funding is supplied by income or sales tax revenue. Meanwhile, in the wee hours of Saturday morning, Republicans created a new giveaway for wealthy parents sending their kids to private schools.
Senate bill creates massive loophole for giant oil and gas companies: Large oil and gas companies already use a tax loophole that allows them to avoid paying corporate tax. But in the middle of the night Friday, Senator Cornyn from Texas air-dropped into the Senate tax bill a new loophole right off the oil and gas lobbyist wish list. This sweetener extends the so-called “small business” pass-through deduction to giant publicly traded oil and gas partnerships. When Americans hear Senate Republicans touting their bill as a boon for Main Street businesses, new tax loopholes for oil giants Valero and Shell are likely not what they have in mind.
Senate bill potentially reopens loophole for the U.S. Virgin Islands: In 2004, over concern that USVI was being used by hedge fund managers as a tax haven, Congress changed the law to ensure that only bona-fide residents could take advantage of low-tax USVI tax status. The IRS and Tax Court have singled out the USVI subsequent to the changes in 2004 as a continuing source of potential tax avoidance for U.S. taxpayers. The Finance Committee Chairman filed an amendment to his own bill that was included in the dead of the night during the Finance Committee Markup relaxing U.S. taxes applicable to businesses in the USVI, potentially reopening a hedge fund loophole for the USVI.
Need for certainty? Senate bill creates massive new group of “tax extenders”: After repeatedly claiming tax reform would be the final end to “tax extenders” — the dozens of temporary tax provisions Congress routinely extends year after year — the Senate bill instead creates a massive new set of extenders. Whether it’s alcohol tax provisions, accelerated depreciation, or nearly all the individual income tax code, Republicans in Washington have injected massive new fiscal uncertainty in order to finance their corporate giveaway, setting up a new “fiscal cliff” in 2025.
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