Veronique de Rugy looks at the two differing tax bills passed by the Senate and the House of Representatives and what needs to be done to blend them into a single bill for the President to sign:
The House and Senate passed their own versions of a tax reform bill surprisingly fast. But now the hard work starts, as they need to turn those two bills into one. The trick is to produce a bill that can pass both chambers again, meaning a bill that appeases some powerful interest groups while still making the budget math work.
In some respects, this conference process may be easier than we think. Once lawmakers have come this far with such a big bill—when stakes are this high—it’s hard to imagine them not doing everything they can to cross the finish line. Helping in the process is the fact that their bills aren’t so vastly different in terms of philosophy and provisions that it makes reconciling differences impossible.
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It’s worth considering some worst- and best-case scenarios resulting from this conference process. Worst-case scenario, the final bill would water down the investment provisions and entirely preserve many tax preferences currently targeted in both bills. It would also preserve the House version’s individual rates, including a 12 percent bubble rate for top income earners, which effectively would impose a marginal tax rate of 45.6 percent, as opposed to the current 39.6 percent.
It would expand the child tax credit value beyond the levels passed in the House ($1,600) and the Senate ($2,000). That change would remove a large number of taxpayers from the tax rolls, which would be problematic because Republicans also refuse to cut spending. This also would shift more burden to the top 10 percent (taxpayers making above $138,000), who already pay 70 percent of the total federal income tax. If members of Congress also were to expand the refundable part of the credit, it would dramatically increase government spending, too.
The cherry on a very unsavory tax cake would be if lawmakers adopted the House’s tax base erosion provisions, which include an idiotic excise tax that resembles the dreaded border adjustment tax, which was killed in recent months.
To finish on a positive note, allow me to dream a little. My best-case scenario would maintain the permanent 20 percent corporate tax rate. It would also delay the adoption of anti-tax avoidance provisions until lawmakers get to assess the full impact that cutting the corporate tax rate has on avoidance behaviors by companies. Congress would adopt the Senate version of the individual tax rates or even cut the top marginal rate further.
