Archive for Wednesday, December 13, 2017

Opinion: Mad dash on tax bill is nonsense

December 13, 2017

Advertisement

— Of all the follies of 2017, the most tawdry may be the GOP’s headlong rush to pass a tax bill that even its proponents don’t understand. What’s especially sad is that otherwise sensible Republicans seem to be capitulating to the tax-cut frenzy.

Political desperation is the mother of this legislation. Despite Republican control of both houses of Congress, the Trump administration has failed in its first year to enact legislation that deals with major problems, such as health care and immigration. So at year end, we have the spectacle of Trump and Co. bellowing a populist message about lower taxes, even as special-interest lobbyists drive the legislation toward a chaotic conference and final passage.

The tax bill is a Rubik’s Cube of potential problems, but the difficulties begin with the fact that it has been pushed through Congress in two months without hearings or careful analysis. The provisions were crafted in secret and passed on party-line votes, without a chance for assessment or analysis.

This haste guarantees confusion later. Without a clear legislative history, tax lawyers at the Internal Revenue Service won’t have adequate guidance when they try to write regulations implementing the law. Courts won’t have a record of congressional intent, other than press conferences, tweets and hurried floor and committee statements.

The centerpiece of the legislation is a big cut in corporate taxes, down from 35 percent to roughly 20 percent. The theory is that this will encourage companies to invest in job-creating plants and equipment. But there’s little evidence to support this assumption, and lots to challenge it. Companies may instead use the windfall to buy back their own stock, boosting stock prices and inflating executives’ personal compensation, as Steve Clifford explains in his recent book, “The CEO Pay Machine.”

The premise is that by stimulating growth, the tax cuts will pay for themselves. But there’s no good evidence for this claim, either. Congress’ bookkeeper, the Joint Committee on Taxation, predicts that over 10 years, the tax law would balloon the deficit by roughly $1 trillion, even assuming that it stimulates new growth. An even more pessimistic estimate was issued Tuesday by the Wharton School, which President Trump is always bragging about having attended.

The Treasury Department on Monday offered a one-page rebuttal asserting that Trump administration policies, including the tax cuts, would grow the economy by 2.9 percent over the next 10 years (much higher than most other forecasters have projected) and reduce the deficit by $300 billion. Take a bow, Rosy Scenario.

The capricious effects of the bill are becoming clearer as Congress races to marry the House and Senate versions. Tech companies are howling that they will lose the benefits of research credits if they have to pay an alternative minimum tax (as in the Senate version). Homeowners will be hurt by new limits on the deductibility of interest payments; but landlords, meanwhile, will benefit from new breaks for pass-through companies, argues a Bloomberg analysis. How is that fair?

An analysis by 13 law professors last week warned that the legislation will produce “tax games, roadblocks and glitches” as companies, individuals and state and local governments try to manipulate the new system. “Congress should immediately reconsider its approach,” the tax lawyers pleaded.

One of the trickiest games ahead was explained in a research report published Tuesday by Goldman Sachs. The tax bill implicitly punishes high-tax “blue states” by limiting the deductibility of state and local taxes. But Goldman analyst Alec Phillips noted that affected states might “change their own tax systems to reflect the new federal system,” by reducing personal income taxes and adding more state-level value-added taxes or property taxes. That could reduce federal revenue.

One more hidden danger: Existing tax law is mildly counter-cyclical (in that tax receipts increase when times are good and decline when they’re bad). But the Goldman analyst notes that provisions in the new law “look likely to move the tax code in a more procyclical direction.” That’s dumb economics.

Robert Crandall, the former CEO of American Airlines and one of the smartest business executives around, described the tax bill last week as “particularly stupid because there is a broad consensus of bipartisan agencies and economists who agree it cannot increase growth by anywhere near enough to offset the revenue losses.” He’s right.

Responsible Republicans seem to have adopted a fatalistic view that it’s too late to clean up this mess. They’re wrong. Voters will remember who tried to slow the rush toward passage of this ill-considered legislation and who jumped onto the bandwagon.

— David Ignatius is a columnist for Washington Post Writers Group.

Comments

Gary Stussie 1 month ago

"slow the rush toward passage of this ill-considered legislation"

Perhaps if any Democrats had initially voted for the House or Senate versions of the tax bill the Republicans would not feel the urgency.

Democrats historically have an allergic reaction to the mention of tax cuts, so to keep the Base on-board NO Democratic House or Senate members voted for their respective versions

Well that is a big problem for the left! If the Bill gets signed by Christmas the IRS has confirmed that we (the voters) will see actual impacts by February 2018.

If it performs as expected, voters will be questioning why the DEMs did not support it ... and DEMs will be creamed in November 2018. So the DEMs walk the line by saying they didn't support it because Republicans did not follow the process or would not wait until the new Senator from AL was seated..

Never appears that the people or country is the concern ... only acquiring/retaining power! Disappointing.

Greg Cooper 1 month ago

"Perhaps if any Democrats had initially voted for the House or Senate versions of the tax bill the Republicans would not feel the urgency." Perhaps, if the bill was sensible and advantageous for the entire nation, Dems, if invited, which they weren't, might have participated.

"Democrats historically have an allergic reaction to the mention of tax cuts..." You mean, like John Kennedy? too, tax cuts that do no harm are welcome by all Dems, but this bill doesn't come close to fitting that criteria.

"If it performs as expected, voters will be questioning why the DEMs did not support it ..." That's a pretty big IF when one looks at the analyses of those other than the Regressives. Oh, that's right: you didn't read the article before your keyboard started spewing nonsense.

Carry on, then. And have a nice day. Really.

Josh Berg 1 month ago

Illegal Immigration is down 75%. That to me sounds like the opposite of what you wrote.

Greg Cooper 1 month ago

Ummm...tax cuts, illegal immigration. OK, I'm lost here. What have they to do with each other and who brought it up?

Josh Berg 1 month ago

I was responding the article Greg, I know tough concept for you. In the article it says Trump has failed to pass legislation that deals with healthcare and immigration. I was merely saying that illegal immigration is down 75%.

Greg Cooper 1 month ago

I see. So, if an article stated that the outside temperature in Washington was 29 degrees at the time of Chump's failure to pass health care "reform" and immigration, you'd respond that, by that statement, climate change is a hoax, right?

And, by the way: "Illegal Immigration is down 75%. That to me sounds like the opposite of what you wrote." To whom were you responding? Neither I nor Gary mentioned immigration, so it seems difficult to see what was written that is the opposite of what WAS written. Who wrote the opposite comment you referred to?

Commenting has been disabled for this item.

loading...