From [ThinkProgress] Republicans in the Senate were determined to a write a tax plan that, unlike the House’s proposal, would be less of a handout to some of the wealthiest Americans. Unfortunately, it seems the new plan still benefits them significantly.
Both bills center around a huge corporate tax cut that Republicans hope will allow freed-up cash to trickle-down to the middle-class in the form of higher wages and more jobs. Analyses of the House tax plan finds that it falls far short of that goal, and the Senate bill doesn’t hold up any better under scrutiny.
Under the 373-page Senate plan — which Republicans dropped just before the long holiday weekend — the corporate tax rate would be lowered from 35 percent to 20, but unlike the House plan, that change wouldn’t phase in until 2019. This one-year delay would save the U.S. Treasury about $108 billion, which is crucial, given that the corporate tax cut is the single-most expensive change to the U.S. tax code, reducing the federal revenue by $1.46 trillion over the next decade.
The trade-off for these corporate tax cuts, however, is so small that even delaying their implementation wouldn’t make much of a difference in the long-run. Many corporations already pay a lower effective tax, with some paying no U.S. taxes at all. The effective corporate tax rate, after credits and deductions, is closer to 19 percent, according to the Congressional Budget Office.
For those companies to whom the 20 percent rate would apply then, the extra money would likely end up back in the pockets of the shareholders, and would not, as Republicans argue, translate to increased job opportunities and higher wages for workers (even the economist who helped create the policy doesn’t even believe that).
Another provision in the House tax plan that was seen as a huge handout to the ultra-wealthy, repealing the estate tax, also finds its way into the Senate plan, albeit in a slightly different form. The Senate plan does not entirely repeal the estate tax, but rather doubles the exemption threshold. Now, individuals won’t pay taxes on the first $11 million of inheritance, rather than the first $5.5 million.
The Senate bill notably retains a number of personal exemptions that would be eliminated under the House plan, including the student loan interest deduction and medical expense deduction, an exemption primarily utilized by seniors and individuals with very high medical costs. The mortgage interest deduction will also remain intact, which would allow individuals to deduct the interest they pay on the first $1 million of mortgage debt. (This was lowered to $500,000 in the House GOP plan, which caused some outcry among real estate and homebuilders associations, as well as congressmen who represent areas with extremely hefty real estate costs.) [MORE]