Senate Considers Making a Terrible Tax Bill Even Worse


Credit Selman Design

This is how Senate Republicans compromise these days: They could make their enormously unpopular tax bill, which lavishes benefits on corporations and wealthy families, more generous to real estate tycoons and hedge fund billionaires to win over a couple of lawmakers who say the legislation doesn’t do enough for small businesses.

Even by the collapsing standards of Congress this is astounding. The change demanded by the two unhappy senators — Ron Johnson of Wisconsin and Steve Daines of Montana — would further lower the tax bills of people like President Trump who earn most of their income through limited liability companies, partnerships and other “pass through” businesses that do not withhold taxes on the money passed along to their owners. About 70 percent of all pass-through income goes to people in the top 1 percent of Americans who receive any income whatsoever.

Under the Senate bill, business owners could claim a 17.4 percent deduction on their pass-through income before paying taxes. Mr. Johnson and Mr. Daines want a higher deduction, meaning that moguls would pay taxes on less of their earnings. It is conceivable that this could benefit some mom-and-pop businesses, but only modestly so. This is really about stuffing the pockets of people like Mr. Trump, who controls his real estate, licensing and hospitality empire through more than 500 pass-through businesses, according to his lawyers.

Forgotten in this deal-making are the millions of poor and middle-class families whose tax and health insurance premiums would rise under the Senate bill. Republican lawmakers keep talking about how middle-class families would see tax cuts of about $1,000, or about $19 dollars a week, but those cuts would last only a few years before expiring after 2025. By 2027, families making under $75,000 a year would on average pay more in taxes, according to the Joint Committee on Taxation. All told, half of all taxpayers would pay more by that year and two-thirds of people in the middle 20 percent of the income distribution would pay more, according to the Urban-Brookings Tax Policy Center. People earning $40,000 to $50,000 would collectively lose $5.3 billion by paying more in taxes and receiving less in government spending in 2027 while millionaires would gain $5.8 billion, according to the Joint Committee and the Congressional Budget Office.

The bill would also repeal the Affordable Care Act’s mandate that most Americans have health insurance or pay a penalty. As a result, up to 13 million could lose coverage, and premiums would rise 10 percent a year for the next 10 years, the C.B.O. says. Senator Susan Collins of Maine has correctly noted that any temporary tax cuts for the middle class would be more than offset by the higher cost of health insurance — a good reason for her to vote against the bill.

Because it would cut corporate taxes so deeply — to 20 percent, from 35 percent — this bill would blow a huge hole in the federal budget. Over the next 10 years, it would add more than $1.4 trillion to the federal deficit. That hole would have to be filled somehow, someday. That would probably mean even higher taxes on the middle class in the future and cuts to Medicare, Medicaid and other important government programs. Several Republican senators — Bob Corker of Tennessee, Jeff Flake of Arizona, James Lankford of Oklahoma and Jerry Moran of Kansas — have expressed concerns about the deficit. If they are genuinely troubled, they will uphold their demand that Congress not pass the buck for tax cuts to future generations and will vote no on this bill.

The majority leader, Mitch McConnell, is trying to rush the bill to a vote by the end of the week. This self-imposed deadline is intended to give lawmakers and the public as little time as possible to analyze and understand the bill. The Senate has held no hearings on this legislation, which has been cooked up behind closed doors by Republicans without Democratic input.

Senator John McCain of Arizona gave a stirring speech in July about the need for the Senate to be “deliberative” and “bipartisan” during the debate about repealing the A.C.A. The mad dash to get a tax bill passed before Christmas has been a prime example of what Mr. McCain was railing against. If he stands for the principles he spoke about so eloquently, he will vote no on this bill, just as he did on the deeply flawed health care legislation.

Republican senators have a choice. They can follow the will of their donors and vote to take money from the middle class and give it to the wealthiest people in the world. Or they can vote no, to protect the public and the financial health of the government. There’s no compromise on that.

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