By Bernie Becker | 12/06/2017 10:00 AM EDT
THE LAND OF UNINTENDED CONSEQUENCES: Republicans are on the verge of passing a big, big tax bill, so it's only natural that those changes could need tweaks down the line or not lead to the outcome its drafters were seeking.
That's akin to what happened when the Democrats passed Obamacare more than seven years ago. But as Pro Tax's Brian Faler notes, the light speed in which Republicans are moving on taxes - it's now been just five weeks since the House released its plan - has only made it more likely that the GOP's work will need another look, and potentially pretty soon.
The Senate's decision to keep the corporate Alternative Minimum Tax, thus severely undercutting the research and development credit, has gotten a lot of attention. So has the potential gaming of the special tax incentives for pass-through businesses. But there's a lot more where that came from, tax lawyers say. There's haziness around a proposal to tax big college endowments, and a Senate proposal aimed at tamping down on tax avoidance might lead to convincing people to not even start a company. Perhaps biggest of all: There's a complex new international tax system that would start on Jan. 1 that has experts still scratching their heads.
And keep in mind: "Republicans may try to pass subsequent legislation to address problems, but that may not have the 'reconciliation' protections they're now relying on to move their plan through the Senate, which means Democrats could block any changes."
WELCOME BACK: Top Republicans had been fond of saying that tax reform would end the cycle of tax extenders, those temporary provisions that expire and get restored like clockwork. Well, maybe not. In fact, GOP tax writers expect to bundle together a group of those short-term provisions in the next couple weeks and potentially tack it on to a year-end spending package, Pro Tax's Aaron Lorenzo and your Morning Tax author report. The central focus of that emerging package appears to be energy incentives, after supporters felt like those preferences got a raw deal in a big 2015 extenders deal.
Also of note: It's not just that there'd be an extenders package moving at essentially the same time as a broader tax overhaul. The Senate GOP tax bill itself also sets up a potential fiscal cliff in another eight years.
HELLO, WEDNESDAY, where we'll be looking out to see if the Senate decides to vote to go to a tax reform conference.
It's now been 84 years since what's become one of the most famous judicial decisions of the last century - Judge John Woolsey's ruling that James Joyce's Ulysses, while "rather strong draught," was not obscene. The Customs Service had earlier found that "if it could be argued that books abounding in obscenity, filth and rottenness are books of undoubted merit and literary value, then this book is a masterpiece."
We'll take all your tips and feedback, the more literary value the better. Email: firstname.lastname@example.org, email@example.com, firstname.lastname@example.org, email@example.com, firstname.lastname@example.org. Twitter: @berniebecker3, @tobyeckert, @brian_faler, @colinwilhelm, @AaronELorenzo, @POLITICOPro and @Morning_Tax.
QUICK, QUICK: Congressional Republicans are well on pace to meet their goal of getting a tax bill to President Donald Trump's desk by Christmas. But the president himself wants Republicans on the Hill to beat that Dec. 22 deadline, and said at the White House on Tuesday that "I think it's going to go pretty quickly. We're all on the same page," as Nancy Cook and Aaron Lorenzo report.
WHERE THEY'RE NOT ON THE SAME PAGE: Senate Majority Leader Mitch McConnell (R-Ky.) might have promised Sen. Susan Collins (R-Maine) that a pair of health care measures would go into law this year, in order to deal with the fallout from the Senate tax bill's repeal of Obamacare's individual mandate. That won Collins' vote in the end, but House Speaker Paul Ryan (R-Wis.) is letting it be known that he didn't sign off on that plan, The Hill's Peter Sullivan reports. "Ryan's office told a meeting of staff from the four top congressional leadership offices on Monday that he has not made that same commitment, raising further questions about whether the ObamaCare bills, already opposed by House conservatives, can pass the House."
Still, Ryan stopped short of saying he was against the bills, which are likely to be tacked on to a government spending measure sent to the House at some point in the coming weeks. For her part, Collins has said she's confident that the measures will go into law, given the assurances she got from Trump and McConnell.
WHERE THEY'RE TRYING TO BE: House Ways and Means Chairman Kevin Brady (R-Texas) told reporters Tuesday that Republicans are looking at a number of ways to offer more tax relief to Californians - who wouldn't be able to deduct their state income taxes, currently the highest in the nation, under either the House or the Senate plans. One idea that's been floated is to allow taxpayers to write off either their income or property taxes, given that the House and Senate bills currently allow a deduction of up to $10,000 in property taxes.
Brady said Tuesday another idea would be to offer a set $10,000 deduction amount, and allow taxpayers to use it on a combination of property, income or sales taxes - a plan he acknowledged would come with a significant cost. All but three California Republicans in the House ended up backing the chamber's tax plan, after protesting far less than their counterparts from New York and New Jersey. Rep. Darrell Issa (R-Calif.) has said he opposes both the House and the Senate plans. (More from both The Wall Street Journal and The Washington Post.)
Where else? Brady also said he saw "a good path going forward" when it came to private activity bonds, as Colin Wilhelm reports. The House bill would end tax benefits for those bonds, and Brady has repeatedly said the bonds have strayed from their mission of helping infrastructure. But he added Tuesday that negotiators were "listening very closely" to the feedback they were getting on the issue.
** A message from the Secure Family Coalition: No one wants to fly without a safety net. That's why 75 million families rely on the products and services that life insurance companies and their financial advisors provide. Protect the financial safety net as part of tax reform. Learn more at SecureFamily.org. **
DEFINE 'POPULAR': Trump said Tuesday that the more voters learn about the GOP tax plans, the more they like it, as CNBC notes. One problem - that's not what the polling says. Both Gallup and Quinnipiac recently found that only around three in 10 back the tax proposals, with both polls finding only around a quarter of independents in support. One interesting point, via the WSJ: Quinnipiac found that around two in five believe that they'll pay more under the tax proposals, even though the vast majority of taxpayers would be projected to pay less in 2019. (The Senate phases out all of its individual tax relief at the end of 2025 - so taxpayers could end up paying more in the long run, even as Republicans maintain that tax relief will eventually be extended.)
CORPORATE AMERICA SAYS...: The Business Roundtable said Tuesday that corporate chief executives are growing increasingly optimistic about the economy, with Jamie Dimon of JPMorgan predicting that the benefits of the GOP tax bills will eventually trickle down to workers. Republicans have said they expect the 20 percent corporate tax rate they're close to implementing will spur new investment in the U.S. and grow wages, but the Business Roundtable also said Tuesday that chief executives are worried about labor costs and expect to reduce the number of people they hire over the next six months - even as sales are expected to increase, CNBC reports.
TSK ON YOU, BUT NOT ON ME: Brussels tabbed 17 countries for a tax haven blacklist on Tuesday, including notable places like Panama and the United Arab Emirates, Bjarke Smith-Meyer reports. Another 47 countries were put on a graylist, which essentially puts those nations on notice. But what was perhaps most notable was that European Union didn't call out any of its own countries known for their low-tax regimes, like Ireland, Luxembourg and the Netherlands. The EU also put Bermuda, the Cayman Islands, Jersey and other places with links to Britain that have been dubbed tax havens on the graylist, not the blacklist.
SOUTH DAKOTA, CONSTRAINED: South Dakota - which is leading the charge to allow states to wring more sales taxes from out-of-state online retailers - is running low on revenue for a second straight year, the Associated Press reports. "Recently released state figures show that revenues for the first four months of the current budget year are roughly $8.3 million, or 1.5 percent, below expectations due in large part to short sales tax receipts. Officials pin the weakness in sales tax, the state's main revenue source, on low farm income and inflation, e-commerce sales and increased health care costs."
Blue state taxpayers take it on the chin in the GOP proposals, as noted by both The New York Times and Bloomberg.
Graduate students arrested protesting tax bill at Ryan's office.
Rep. Mark Sanford (R-S.C.): GOP didn't label its tax bill right.
DID YOU KNOW?
Ulysses Grant only voted for president one time before taking the office himself, in 1869.
** A message from the Secure Family Coalition: Life insurance companies and their financial advisors offer financial security to families precisely when they most need it. Widespread use of the products they provide, which include employer-based retirement plans, annuities and IRAs, help people prepare for retirement. Along with life insurance, long-term care and disability income insurance, these products comprise the private sector safety net that 75 million American families rely on. Protect the financial safety net as part of tax reform. Learn more at SecureFamily.org.**
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