The Hill reports that the tax reform bill is moving in two different directions as the Republicans on Capitol Hill continue their work on it.
The story, by Alexander Bolton, quotes an anonymous Senate Finance Committee aide who said, “We stayed kind of inside the big structural issues.” But they also went ‘kind of outside’ the House draft in some respects, too, including the number of brackets (seven, rather than the House version’s four).
The key philosophical distinction is that the Senate Republicans continue to want to use the tax code for various policy purposes, such as stimulating the home building industry or encouraging higher education, whereas the tax drafters in the House see these policy features of tax law as ‘loopholes’ that need closing, or at least narrowing with a view to eventual closure.
The Senate, for example, proposes to keep in place the deduction for newly purchased homes, up to $1 million. The House plan would cut that threshold to $500,000. That’s a big difference, reflecting the power of the National Association of Home Builders, but it also feels like the sort of difference that is routinely split in conference (call it $750,000 and call it a day).
The Senate also preserves credits and deductions for adoption, medical expense, teacher expense, and student loan interest.
The Senate bill is also more generous with the child credit, which it begins to phase out only when the income of a household exceeds $1 million. The corresponding House phase-out begins at $230,000.
As to the corporate tax, the Senate bill includes the same cut (to 20%) that the House bill does, but delays its implementation for a year. The House bill implements that cut immediately.
All those changes mean the Senate bill would account for less revenue than the House bill would. Going in the other direction, though, is another big difference. The Senate bill is more draconian about deduction for state and local taxes. It would abolish that deduction across the board, whereas the House bill would preserve it for property taxes specifically.
Right Wing View
The conservative group Freedom Works put out a statement immediately. It was polite (the Senate bill is a “welcome part of the discussion”) but clearly on the side of the House Republicans on the philosophical split, saying that the delay of the corporate tax cut “until the beginning of 2019 is unacceptable [because in such a case] Americans won’t see the impact of economic growth and job creation by November 2018,” that is, in time for the mid-term elections.
The White House was likewise polite about the Senate Finance Committee’s work, calling the resulting bill “another important step” in the process of “historic tax relief.” But the White House statement – understandably distracted at the moment by the boss’ Asia travels — took no side as to the differences between the two bills.
Seth Grove, a state representative in Pennsylvania, tweeted Friday morning, “The best tax structure creates a broad base and low tax rates that focus on economic growth, putting money into the pockets of taxpayers, limited ‘loopholes’, and emphasizes investment.” That is a succinct statement of the case for the House bill.
Left Wing View
On twitter, Diane Yentel, the President of the National Low Income Housing Coalition, issued her own response to the Senate version of this bill in good news/ bad news form. The good news in her view is that the Senate would retain the low-income housing tax credit and the tax exemption for private activity bonds (PABs).
The bad news, Yentel continues, is that the Republican Senators “pass on the opportunity to rebalance housing policy and directly reform “ the mortgage interest deduction.
More broadly, though, the left wing view of the Senate Republican’s tax plan is that it is too much like the House Republicans’ tax plan. As Dylan Matthews of Vox writes, the Senate plan is just a re-working of the general idea of dramatically slashing corporate tax rates leaving “a substantial share of middle and upper middle class people paying more” and yet “dramatically expanding the national debt.”
After a Democratic victory in the Governor’s race in Virginia, a leading Democratic Senator gleefully asked, “Are Republicans now going to pass a tax bill that would raise taxes in the same suburban areas that are swinging away from them?”