In the early hours of Saturday morning, December 2nd, Senate Republicans passed their version of a sweeping tax overhaul. Roughly five hours earlier, the Senate Finance Committee publicly released their final proposal of the Bill after weeks of closed door consultations and few days of public scrutiny of the important Tax Bill that will leave over a over a Trillion Dollars to the US deficit.
The Senate passed its tax plan in a 51-49 vote early on Saturday morning, with Vice-President Mike Pence presiding over the chamber and after a frantic rewrite. Bob Corker was the sole Republican to vote against the bill, which would bestow huge benefits on US corporations and the wealthiest Americans. “We think this is a great day for the country,” the Senate majority leader, Mitch McConnell, said at a celebratory press conference.
Democrats remained united in their opposition, attacking the legislation as a giveaway to corporate America and the wealthy. “In the waning hours, this bill is tilting further towards businesses and away from families,” said Chuck Schumer, the Senate minority leader, in a floor speech on Friday. “Every time the choice is between corporations and families, the Republicans choose corporations.”
The bill, among other things will continue to create inequality in the nation. The rich bnenfitting from the tax-cuts, while the poor and the middle income groups to be marginally benefitting from the plan, and that to for a period of 10 years only. The richest 20 percent of households reap 90 percent of the benefit of the tax cuts over that time period, according to the nonpartisan Tax Policy Center.
The main focus of the tax bill is business. Republicans’ stated goal is to boost the economy. They argue that the best way to do this is to cut the taxes that businesses pay on profits, allowing companies to reinvest the money in new equipment and workers. In fact, the Senate bill centers on provisions to permanently cut the corporate tax rate — the rate paid directly by companies like Apple or Ford Motor — to 20% (from a top rate of 35%) starting in 2019, while also allowing a new deduction for individual taxpayers who own their own businesses.
Business owners tend to be wealthy — whether their assets take the form of stock holdings or privately owned ventures. The upshot is that the Senate tax plan’s benefits skew dramatically toward top earners.
According to the preliminary Tax Policy Center analysis, the top 1% of earners — those taking home more than about $900,000 a year — were set to reap about 60% of the total tax cut, for an average of more than $32,000 annually apiece. The top 0.1% — those earning $5 million or more — were to get an extra $200,000.
The GOP’s Senate tax bill, which passed in a close party-line vote, could give President Donald Trump his first legislative victory after Congress failed to overhaul the nation’s health system earlier this year.
It’s too early to tell precisely how the GOP tax plan would affect individual taxpayers. That’s because, in an effort to muster votes, Republicans continued tinkering with the tax bill behind closed doors up until a few hours before it actually passed, and the economists who typically crunch the numbers on new legislation haven’t had time to examine the tax bill’s results.
Like the House tax bill, passed earlier this month, the Senate version is largely built around reorganizing and lowering what corporations and other businesses pay in taxes in hopes of spurring economic growth. That said, middle-class Americans could be able to count on a tax cut too, at least during the next few years — assuming, that is, that the Senate bill can be reconciled with the House version and become law. You’ll probably see a tax cut, but maybe only in the short term.
Senate Republicans initially repealed the Alternative Minimum Tax, but have brought it back now in order to pay for some other additions. The AMT is intended to be a minimum tax on the wealthy. In this version, the GOP raises the income levels where it hits so it will affect fewer people. For individuals, the minimum threshold goes from $50,600 to $70,600. For those filing jointly, the threshold rises from $78,750 to $109,400.
Trump campaigned on a promise to cut middle-class taxes. And the Senate is delivering — sort of. One analysis of the tax plan, by the Tax Policy Center, a centrist think tank, found the average middle earner (someone taking home about $50,000 to $90,000) would reap an $850 tax break in 2019, benefiting in part from a standard deduction that would double to $12,000 for singles and $24,000 four couples.
Another preliminary analysis, this one by The New York Times, defined middle-class earners as those making $40,000 to $140,000 — and found that many of those, particularly the people that rely on the state and local tax deduction, could actually see a tax increase next year. However, the last minute, at the instance of Maine’s Sen. Susan Collins, would allow taxpayers to continue to deduct up to $10,000 in property taxes, would likely soften the blow for at least some of these middle-income taxpayers.
For most of the Americans, the benefits of the tax cuts are also likely to be temporary, as the tax breaks for them will expire in 2026, while the huge tax cuts for the corporations are made permanent. The bill also uses a new way to account for inflation, which could push some taxpayers into higher brackets. By 2027, savings for the average taxpayer earning roughly $50,000 to $90,000 will have shrunk to just $50, the Tax Policy Center found.
During the campaign Trump promised a tax cut that would be “revenue neutral.” The idea was that, while government receipts might initially fall when rates were cut, economic growth would boost American’s incomes enough to replace the lost revenue despite the lower rates. Howver, even accounting for economic growth, the Senate plan will add about $1 trillion to the debt over the next decade, according a report from non-partisan Joint Committee On Taxation.
Many economist believe that piling still more debt on top of what the government already owes — currently $14 trillion — could eventually lead investors to sour on U.S. bonds. The result would be higher interest rates, which would push up borrowing costs for everyone from the government itself to most U.S. businesses. That in turn could choke off whatever extra growth the tax cuts spurred in the first place.
The stated goal of tax reform is improving the economy, and the right-leaning Tax Foundation predicted in November that the bill (as it stood at the time) could ultimately help the U.S. add almost a million new jobs over the next decade. But economists are divided about whether that growth will in fact play out as hoped.
The Tax Foundation tends to see rates remaining low, even as the deficit increases — hence its rosy job forecast. But many economists disagree. Earlier this month, researchers at the University of Pennsylvania estimated the tax cut could add as little as 0.03 to 0.08 percentage points to annual GDP growth over the next decade, which would presumably bring far fewer jobs.
the big winners in the GOP bill that the Senate passed early Saturday morning are corporations and the wealthy. Trump himself ― a billionaire ― stands to gain millions through the elimination of certain taxes. Far from being a middle-class tax cut, the measure is a massive corporate giveaway, a bill that recycles decades of Republican ideology on trickle-down economics and trusts that executives will hand over their new gains to average-income workers. “If my friends here want to give a tax cut to the middle class,” Sen. Sherrod Brown (D-Ohio) asked on the Senate floor Thursday, “why don’t we give a tax cut to the middle class?”
And the bill makes other changes that reach far beyond the tax code itself. It repeals the individual mandate from the Affordable Care Act, a major change that was added in recent weeks as part of a broader GOP effort to dismantle the Obama-era law. The measure is expected to leave 13 million more people uninsured. It authorizes oil drilling in the Arctic National Wildlife Refuge in Alaska. And by curtailing deductions for state and local taxes, it will put pressure on some state and local spending on education, transportation and public health programs.
The tax package still must clear a couple more hurdles before it can become law. There are numerous differences between the House and Senate versions, ranging from when certain tax cuts expire to how the estate tax is handled, and though none are seen as showstoppers, complications could arise.
“The bill is investing heavily in the wealthy and their children — by boosting the value of their stock portfolios, creating new loopholes for them to avoid tax on their labor income, and cutting taxes on massive inheritances,” Lily Batchelder, a New York University professor who worked as an economist under President Barack Obama, said. “At the same time, it leaves low- and middle-income workers with even fewer resources to invest in their children, and increases the number of Americans without health insurance.”
America’s rich have gotten richer for decades, while the middle class and poor have seen meager gains. Since the mid-20th century, the top 1 percent have more than doubled their share of the nation’s income, from less than 10 percent to more than 20 percent. The tax overhaul the Republican Party passed through the Senate would make America’s income inequality worse. Maybe a lot worse, economists say. Sen. Bernie Sanders (I-Vt.) said on the Senate floor that this day would be remembered as one of the “great robberies in U.S. history.”