GOP tax plan: Four issues lawmakers are talking about
House tax writers shut themselves in a hearing room for the second day this week to mark up the Tax Cuts and Jobs Act. Both sides of the aisle hurled claims about what the tax reform plan will and will not do as the committee moved closer to its Thursday deadline to produce a bill.
Lawmakers are fighting out the details in marathon hearings, and new reports are emerging every day pointing to the winners and losers of the GOP tax plan. As House Majority Leader Kevin McCarthy stated on Tuesday morning, "the challenge to the American people is: what is the truth about this bill?"
In the fray of big promises and harsh accusations, Republicans and Democrats spoke to Sinclair Broadcast Group to address some talking points they are discussing on the Hill:
Will tax cuts only benefit the wealthy?
Just one week after the introduction of the draft tax bill, top Republicans have gone on the record to assert that "every" American will see a reduction in their taxes as a result of the bill. It's a bold claim that has many Democrats crying foul.
On Tuesday, House Whip Steve Scalise (R-La.) told reporters that "under our bill, every income range will see a tax cut."
According to the Joint Tax Committee, during the first years the plan is in place, through 2021, every income level from $10,000 to $1 million and above will see their taxes decrease.
The highest percentage decrease will impact earners making $50,000 and above. Those who earn $500,000 and higher will see the biggest decrease in their taxes, ranging from 1.5 percent to 2.6 percent.
Rep. Diane Black (R-Tenn.) explained that her Democratic colleagues have falsely claimed that not everyone gets a tax break. "They're trying to say there is not going to be a decrease in people's tax returns. Everyone across all the brackets is going to get relief," Black said.
Rep. Danny Davis (D-Ill.) agreed in part, but took issue with the distribution of the tax breaks among the highest earners, who will see a greater percentage of the tax relief.
"For people at the low end of the scale, they'll get a break. But it might be $50, it might be $60, it might be $200," Davis explained. "But as you go up the scale, the higher income group will get substantially more, all the way up to $130,000 [in tax breaks]."
He continued that the relief was disproportionate, and is being given to somebody "who really doesn't need it as much as a family who might be earning $35-$40,000 who might be raising two to three children."
The other issue is that many of the tax breaks that benefit all income earners will sunset by 2021, under the current plan. One Republican tax writer acknowledged that the phasing out of certain tax breaks is a fact, but argued that those breaks could be extended or reinstated.
Whether a future U.S. Congress will reinstate them, is an open question.
Will tax cuts blow a hole in the deficit?
In October, the House and Senate Republicans passed a budget that allowed Congress to borrow $1.5 trillion over the next decade. That $1.5 trillion is the approximate dollar amount for the tax cuts that being teed-up.
The ranking Democrat on the Ways and Means Committee, Rep. Richard Neal (Mass.) said that the biggest myth he has heard from his Republican colleagues is that a dynamic scoring of the bill will jumpstart the 3 to 3.5 percent economic growth that will justify the $1.5 trillion tax cut.
Neal explained that the Republicans have failed to account for a host of economic headwinds, like demographic trends, skillsets, technology gains and even the opioid epidemic, which all make achieving 3 percent growth more difficult than some have anticipated. "They say, we're going to get 3 percent growth and most economists say, no you're not."
The most recent analysis from the non-partisan, business-friendly Tax Foundation seems to support the claims that the Republicans and the Trump White House have made about boosting annual GDP growth above 3 percent, a historic average for the U.S. economy.
As a result of reducing marginal tax rates on individuals, labor and investment, the Tax Foundation estimates the plan will increase long-run GDP by 3.9 percent. That growth, they continue, would translate into nearly 1 million additional full-time equivalent jobs and workers would see a 3.1 percent increase in their wages.
Rep. Lloyd Doggett (D-Texas) is not convinced by the analysis and sees the debt increase as a deal-breaker.
"They have admitted that they are borrowing $1.5 trillion. I believe with interest, that will go up to more like $2.3 trillion and it may go even higher," he said, warning that under the GOP plan "the deficit will explode."
Does getting rid of tax deductions mean millions of Americans will pay more?
In an effort to simplify the tax code, the Republicans have cut a huge number of tax deductions that families and individuals are entitled to take under the current code.
Tax writers believe they are balancing out the possible losses to people who itemize their deductions by, first, doubling the standard deduction from $6,350 to $12,000 for an individual and $12,700 to $24,000 for a couple.
Lawmakers are also increasing the child tax credit from $1,000 to $1,600 and adding a $300 tax credit for dependents as they repeal other deductions that families currently take.
Some Democrats, like House Speaker Nancy Pelosi (Calif.) have condemned Republicans for cutting out deductions for people with student loans, high medical costs, eliminating a credit for lifetime learning and ending the allowance to deduct state and local income tax. She further accused the Republicans of "ransacking the middle-class benefits."
Rep. Jim Renacci (R-Ohio), said that argument is essentially "disingenuous."
"One of the biggest myths I am hearing is that people are saying they will lose deductions they don't already have," he said, explaining that under the current tax code, only 25 to 30 percent of Americans itemize their tax returns.
Renacci cited one estimate that the vast majority of Americans, 94 percent, will not itemize once the standard deduction is doubled.
While Renacci and others are confident that the plan is fair, there are a few sticky issues that will be fought out on the floor of the House and in the Senate in the coming weeks.
The repeal of state and local tax deductions remains controversial for high-tax states, even as lawmakers attempted to compromise with a provision allowing people to write off up to $10,000 in property taxes.
On the child tax credit, House Democrats are planning to introduce a number of amendments to try to get a more generous credit. Rep. Davis explained that the Republican's $600 increase is more than people were getting before, under the current law, "
Will the bill be passed by the end of 2017?
The timetable for passing tax reform seems like mission impossible. Before the Republicans introduced their draft bill last week, President Donald Trump told his allies in Congress that he wants a House bill passed by Thanksgiving and a final bill ready for his signature by Christmas.
The Ways and Means Committee is currently on schedule to finish marking up the bill by the end of the week and the House leadership has scheduled a vote on the tax bill for next week, before Congress breaks for a two-week Thanksgiving recess.
The Senate is expected to be a tougher sell and Majority Leader Mitch McConnell anounced that he will release the Senate tax bill on Friday.
In an effort to shore up much-needed support for the bill, the White House spent Tuesday afternoon meeting with moderate Democrats in red states, including senators Joe Manchin of West Virginia, Sherrod Brown of Ohio, Joe Donnelly of Indiana, Claire McCaskill of Missouri, and Jon Tester of Montana.
Even with this tight deadline, Republicans and Democrats have acknowledged that the bill will most likely make it across the finish line, whether they like it or not.
Rep. Davis lamented the lack of bipartisanship, but he expects the vote will "go down to the wire," with all the Republicans in favor and all the Democrats opposed.
Republicans, undeterred by the tight timeline, say the timetable for the vote is appropriate because they have been thinking and planning a tax overhaul for years.
"It's something that we could literally debate for a year," Rep Doug Lamborn (R-Col.) noted. He continued that most members of Congress, Democrats and Republicans, have been mulling over the issue for a long time. "I think people are prepared to come to a vote soon."