Senate Considers Making a Terrible Tax Bill Even Worse

Senate Considers Making a Terrible Tax Bill Even Worse


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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.



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