Tax reform was supposed to be simpler, more fair, not add to the deficit. and lower taxes on the middle class. It did none of those things, but it did lower taxes on corporations to 20%.
Simpler - No
The Senate version kept the complicated and much despised Alternative Minimum Tax (AMT).
Senate Tax Brackets 7 vs House 4
Individual tax cuts expire after 2025
More Fair - No
Lower Taxes on Middle Class - No
By 2027, only those making more than $100,000 a year gain from reform.
Those making $100,000 to $500,000 get a benefit of 0.1% according to nonpartisan tax analysis.
Reduce the Deficit - No
The Journal notes that pass-through firms, which pay their business taxes through individual returns rather than corporate returns, won major concessions. They would get a 23% deduction from individual rates. More than half of U.S. business income goes to pass-throughs, and more than half of that goes to the top 1% of households.
I am a pass-through firm. However, it is uncertain how this all gets reconciled.
Looking for whom to blame?
I can help. The Bill passed the Senate Finance committee by a 11-10 margin. Senator Bob Corker of Tennessee was the deciding vote after he was given "assurances" that language would be added to reduce the deficit.
He should have known those assurances were not worth a damn. Arguably he did know but simply didn't care.
When the final vote came in the Senate, Corker was the only Republican dissenter.
Too late. The bill needed to be stopped in Committee.
More Assurances Not Worth a Damn
Sen. Susan Collins (R., Maine) scored a $10,000 deduction for property taxes, an expanded but temporary deduction for people with large medical expenses and a "promise of future bipartisan health-care legislation" to mitigate the effects of repealing the individual health insurance mandate.
It is uncertain how some of those promises survive reconciliation. But one thing is certain: The promise of future bipartisan health-care legislation is a complete joke.
Eight Percent Winners
As noted in the "More Fair" chart above, by 2027, only those making more than $100,000 a year receive any benefit. Anyone making under $75,000 is a loser.
Thus, the claim that only the top 1% benefits is false. The top 8% benefits according to 2014 income data.
That analysis is for individuals, not households. The percentage of winning households will be higher.
There are other beneficiaries in the bill. Here is one of my favorites.
Also bear in mind that the Tax Bill Offers Last-Minute Breaks for Developers, Banks, Car Dealers, and the Oil Industry.
As I type, another winner just came in. Surprise, surprise: Senate Tax Revisions Mostly Favorable to Venture-Capital Firms.
Carried interest and stock options get favorable treatment.
Average Household Benefit
If you make less than $100,000 you lose by 2027 at the latest.
Now let's calculate the average win for households making $100,000 in 2027.
Once again, referring to the "More Fair" graphic above, we see the average benefit for someone making $100,000 is 0.1%.
If that's what you make, congratulations! On average, you will have an extra $100 to spend. For that, the deficit will rise by $1,000,000,000,000.
Mike "Mish" Shedlock