Joe had a nice little plumbing business in a pleasant small town. After paying his business expenses, he pulled in a tidy $100,000 a year. For protection against lawsuits, he was incorporated. But he didn’t pay corporate tax. His accountant, Mrs. Ledger, said Joe’s business was a subchapter S corporation, and that meant all his business income passed through to his 1040. So he paid tax on his plumbing income at his personal income tax rate. It was all simple enough. Then along came the Tax Cuts and Jobs Act of 2017.
Tax Analysts Blog
Outraged by GOP tax legislation, Democrats have consoled themselves by contemplating its appalling numbers. By rushing the bill to enactment, Republicans seem poised to seal their fate in the 2018 midterm elections.
Here are two things we know about tax reform, and one thing we don’t. First, a conference bill will be released tonight. Second, it will contain one or more significant limits on the ability of business taxpayers to claim deductions for interest expense. The unknown element is whether the final legislative language will adhere to the House or Senate versions. For the reasons explained below, the details matter.
Finally we’ve had time to review all the dynamic estimates now available on the pending tax legislation. The results are not surprising given what mainstream economists have been saying about the legislation’s effect on growth.
Whether you love or hate the tax bill soon to receive President Trump’s signature, knowing about its hidden problems and opportunities could play a major role in determining everything from your own personal finances to the outcome of the 2018 elections.
I write this as the sun is rising on Capitol Hill. It’s a brisk Friday morning, the first day of December. Senators should already have flown home for their five-day weekends. But Elizabeth MacDonough and Tom Barthold have made that impossible. Elizabeth is the Senate Parliamentarian, the unelected but respected referee who rules on what is in and out of bounds of Senate rules.
The GOP is in a tax panic. Pressured by donors and worried about the 2018 midterm election, party leaders have convinced themselves that a tax cut is vital to their political survival. The unseemly result?
Politics is about leverage, and the pending tax reform effort is a prime example. Republicans hold a narrow majority over the Democrats in the Senate, 52 to 48, meaning they can’t afford to lose more than two senators. Otherwise the Tax Cuts and Jobs Act (H.R. 1) is kaput and it’s back to the drawing board.
History will be made this week on the Senate floor as well as in the opulent cloakrooms adjacent to it, where cameras are not allowed. More than likely it will be in these spaces – no larger than a high school basketball arena and the adjacent locker rooms -- where the upper chamber of the U.S. Congress will draft and then pass the most significant piece of tax legislation in 31 years.
On Capitol Hill and in the media, there is a great deal of debate about the fairness of the Senate bill, especially after the November 16 release of the distribution tables from the Joint Committee on Taxation. (Doc JCX-58-17 at www.jct.gov). Below is a visual summary of one of those tables with some (nonpartisan) embellishment by your author.