Economy

GOP Bends On Tax Reform, Will Allow For Increased Individual Top Rate

GOP Bends On Tax Reform, Will Allow For Increased Individual Top Rate”

The poll released Thursday found that voters trusted Republicans over Democrats on the economy and tax reform by a six-point margin. To the contrary, they quite like them, because they provide scary-sounding numbers they can point to as the reason government can't afford to shore up Social Security and Medicare.

"You have some members from higher-tax states who are concerned about the deductibility of state and local taxes", said Representative David Schweikert of Arizona, a member of the tax-writing Ways and Means Committee and the conservative Freedom Caucus.

But Republicans won't cut Social Security or Medicare because the programs are overwhelmingly popular. Though Democrats writ large have little incentive to work with Republicans under the auspices of tax reform via reconciliation, certain Democratic lawmakers who might feel vulnerable heading into the 2018 Election and are up for reelection will have to make their own determination on how to participate in the tax reform debate.

There's also the cleanup from Hurricanes Harvey and Irma, estimated to be least $190 billion.

Oh, and don't forget infrastructure. Given the state of the nation's highways, byways, public transit, water treatment facilities and sewers, it's desperately needed. That would be $1.4 trillion higher than the $1.5 trillion allowed by the current budget resolution. One problem is the sheer size of the tax cuts being considered - by one account, the current GOP wish list is worth more than $5 trillion over ten years. They're in agreement on wanting to reduce tax rates and simplify the country's byzantine tax system but they're divided over whether to add to the government's ballooning debt with tax reductions. Wasn't that Ronald Reagan's big lesson to the party?

The Congressional Budget Office and the Joint Committee on Taxation don't believe it.

But if they can, it could fire up the economy after eight dismal Obama years and only moderate growth (1.2 percent in the first quarter of 2017; 2.6 percent in the second) under Trump. The Federal Reserve estimates the fastest sustainable rate of economic growth will be 1.8 percent, given how slowly America's working-age population is growing, as well as the slow rate of productivity gains.

While the plan is not finalized, Trump is already planning to promote it heavily.

After blowing a chance to repeal and replace the Affordable Care Act, better known as Obamacare, earlier this summer, another effort to address that issue is percolating in the Senate, but it is too early to predict its chances of success.

"We'll see what happens, but I hope it's going to be 15 percent", he told reporters.

In other words if the Republicans pass this version of massive tax cuts for the rich it is only a matter of time before the discriminated-against corporate executive class, who earn their millions through good old-fashioned pay checks, will be clamoring for a new tax cut so that they should not be placed at a disadvantage to their hedge fund-running neighbors. Terry Haines, senior political strategist at Evercore ISI wrote Monday that odds of tax cuts going through are about 50%. A realistic legislative target would be a corporate tax rate of 25%.

When it comes to individual rates, Trump has proposed a 10 percent floor. However, both parties were tied in May, and the changes in party ratings since May are a function of higher ratings of the Democratic Party among Democrats and lower ratings of the Republican Party among independents.

American corporations aren't overtaxed.

First of all, the effective tax rate that corporations pay - meaning the actual rate after credits and deductions are taken into account - is roughly 20%.This is in line with the other highly industrialized democracies in the Group of Seven, and hardly holding American companies back.

Republican leaders working on a tax reform bill have agreed to increase the lowest personal income tax rate from 10 percent to 12 percent; this bracket now covers the first $18,650 in taxable income (after deductions and exemptions) for a married couple, and the first $9,325 for single people.



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