Republicans Reach Tentative Tax Agreement: Raise Corporate Tax To 21%, Cut Individual Tax To 37%

One month ago, we speculated that in order to pass the GOP tax plan, Congress would end up having to raise the proposed corporate tax rate from 20% to 25%, because as it stands now, there is simply not enough sources of funding.

And while it's not at 25% yet, it's slowly getting there, because as The Hill report as part of the ongoing negotiations between the House and Senate, Republican negotiators have reached a tentative agreement to raise the corporate tax rate in their joint House-Senate tax bill from 20 to 21 percent.  The modestly higher corporate tax rate end a "furious debate" within the GOP conference, even as both conservatives inside and outside the conference, not to mention the president, have fought to keep the 20 percent rate originally approved in separate bills by the House and Senate.

And speaking of the president, it is unclear if Trump is aware that his much-trumpeted 20% corporate tax rate is about to go up by (at least) 1%.

Even with the revisions, it is premature to declare victory, as one conferee noted that there has been no formal vote for conferees to sign off on any provisions in a final bill. “We have not yet a vote on any of these policies," said Sen. Tim Scott (R-S.C.). "There’s certainly a lot of interest in what we do with the corporate rate.” 

While the centerpiece of House and Senate bills is a reduction in the corporate tax from 35% to 20%, there's been a push to hike the rate in order to pay for additional changes to the bill that might benefit more middle class families and smaller businesses.

In addition to raising the corporate rate, another key change under discussion on the tax reform bill is lowering the top rate for individuals from 39.6% to 37%, although this too is a two-edged sword, as lowering the top income rate for individuals might fuel criticism from Democrats that they bill gives too much tax relief to high-income earners. However, it would also solve several problems, such as providing more help to the owners of pass-through businesses and reducing the disparity between those entities and corporations. It could also help people living in high-tax states deal with the loss of higher deductions for local, state and property taxes. The tax-cut bill previously approved by the House keeps the top rate of 39.6%, while the Senate-passed bill would reduce it to 38.5%.

“We are very close to having people on the same page,” said Scott, a member of the Senate-House conference committee.

 

Scott said “there is discussion” about setting the top individual rate at 37 percent, noting “it helps business and it’s also an additive as it relates to SALT,” referring to proposals to limit the deductibility of state and local taxes.

 

But the idea is not sitting well with all Senate Republicans. “This is not the Senate bill,” said one Republican senator who confirmed the discussion of the 37 percent rate and expressed concern. 

On the issue of SALT, the Hill says that there’s also strong support for giving residents in New York, California and other high-tax states a choice about whether to deduct their state and local property or income taxes, up to a $10,000 cap.

Giving taxpayers greater flexibility to deduct the state and local taxes (SALT) is an idea promoted by Majority Leader Kevin McCarthy (R-Calif.), who is No. 2 in GOP leadership.

 

Sen. Susan Collins (R-Maine), a pivotal swing vote, has advocated for setting the corporate rate at 21 percent instead of 20 percent. She says business leaders have told her it would not affect investment significantly. Collins, who supports keeping the top individual tax rate at 39.6 percent for families earning over $1 million, declined to comment on the prospect of lowering it to 37 percent.

Earlier in the day, Senate Republicans signaled that members of the House-Senate conference committee are on a edge of locking down a final deal as soon as Tuesday, in the process sending stocks to new all time highs. 

Senate Majority Whip John Cornyn (R-Texas) told reporters it was possible negotiators could reach a verbal commitment as early as Tuesday. “I think it could, and I hope it is,” said Cornyn, one of the Senate negotiators.

 

Sen. John Thune (R-S.D.) said it was "possible" negotiators could reach an agreement on Tuesday, but noted they are still working.  "It would be nice to be done today. That might be a little bit ambitious but probably possible," he said.

Of course, the fact that the accelerated conclusion would mean billions in lost net income in the form of the difference between 20% and 21% effective tax rate, was not lost on stocks which then closed near the lows, while the US-heavy Russell turned red. And for those who say the difference between 20 and 21% is negligible, keep in mind that the effective tax rate of US corporations is already only 27%. Which means that every 1% increment is roughly equivalent to a 14% change in how much more, or less, effective taxes US corporations will end up paying.

Comments

shitshitshit Tue, 12/12/2017 - 16:29 Permalink

Show me your dick tyler, it's probably even better than your predictions.And you're being right btw: there's not much more they can do to perpetuate the ponzi...

Beam Me Up Scotty God Emperor Tue, 12/12/2017 - 16:43 Permalink

"And you're being right btw: there's not much more they can do to perpetuate the ponzi..."Sure there is, PRINT PRINT PRINT!!!  Why are we paying taxes at all?  The Fed could fund everything we want or need with their freshly printed dollars.  Since we can't audit the Fed, we have no idea how large their balance sheet really is.  Could be 4 trillion or 40 trillion.  Only Janet knows for sure.

In reply to by God Emperor

Librarian overmedicatedu… Tue, 12/12/2017 - 16:55 Permalink

Blame your own inadequate system protection for script-kiddie browser exploits from ANY site.That said, the Ritalin-dosed autists there do occasionally find connections that nobody else has.On the other hand, there are plenty of drooling idiots on /pol as well.It's kind of like ZH, except the noise to signal ratio is much higher.Also they don't seem to allow anyone to post through VPN connections.If you care about your locational anonymity you won't have an account there.

In reply to by overmedicatedu…

Dontblamethegoat Chris88 Tue, 12/12/2017 - 17:13 Permalink

Curious why they tax the cost of equity capital (dividends), but not the cost of rented capital (loans from banks)?

If anyone was serious about tax reform, this one change whould have an enormous effect on how corps fund themselves and would reduce the power of banks over our economic system.

This is so important, but no one even mentions it.

In reply to by Chris88

Faeriedust Dontblamethegoat Tue, 12/12/2017 - 20:21 Permalink

Actually, there's a lot of fine print in this one that addresses that issue, although sideways.  For instance, in the past if you borrowed to purchase capital equipment, the interest was entirely deductible -- a freebie for the banks -- but if you used your own profits, you could only write it off your taxes over the course of 3-10 years.  The original House bill at least had this reversed -- no deduction for interest, but immediate write-off if your corporation used its own money.  There were several more little zingers like that, reducing the tax advantages of borrowing and increasing those of using retained earnings.  It wasn't all bad.

In reply to by Dontblamethegoat

nobodysfool Tue, 12/12/2017 - 16:42 Permalink

After Tax cuts let's discuss across the board Govt Agcy budget cuts to the tune of say....30%? ...to be negotiated down to increases of only 5%.  Sigh....STOP SPENDING!!

brushhog Tue, 12/12/2017 - 16:48 Permalink

The most important part of the bill is the repeal of Obama's individual mandate, forcing people to buy high priced insurance. The Senate version included the repeal, the house version did not. I want to know if that repeal is going in there.

No Time for Fishing brushhog Tue, 12/12/2017 - 18:17 Permalink

Repeal of the individual mandate is no help to those who are responsible and thus understand they need to have health insurance of themselves and their families. Removing the legal requirement does not negate the need. As long at Obamacare and it's mandates and manipulations are in place; the ability of buying INSURANCE that meets my needs as defined by me priced in an actuarially sound way guided by the forces of the free market will not exist and thus affordable INSURANCE (not yadayada care) will not be possible. 

In reply to by brushhog

Faeriedust No Time for Fishing Tue, 12/12/2017 - 20:15 Permalink

Not everyone NEEDS a vastly overpriced product for services which are most of the time all but rammed down your throat or up your ass whether you want them or not.  Believe it or not, many people have figured out that under most conditions, you live until you die.  All modern medicine can do for most of the illnesses we get these days, is help you to die slower and more painfully.  And expensively enough to assure that there will be no estate for children or grandchildren to split up.The best way to assure that you aren't kept "living" as a mental vegetable for several years after effective death is to make certain that you DON'T have insurance.  Hospitals are notably reluctant to pull the plug on a paying customer, no matter how many papers you sign.  Hell, didn't you see a week ago in the New York Times, the article about a man who had "Do Not Resuscitate" TATOOED on his chest, and the surgeons still wouldn't honor his wishes until they managed to dig up a signed, sealed, and certified Living Will with the same orders AND had a PhD ethicist advise them to follow it?  If, on the other hand, they know that their bills aren't going to be paid, they're much more willing to let you go.  Funny that.If, on the other hand, you're going to live, you will usually do so with or without medical attention.  Really.  Most of those tests and monitors they have surrounding you are for the staff's comfort, convenience, and curiousity.  For the patient, they merely add to the discomfort of being in a hospital, which adds to stress, which reduces the changes of survival without fancy interventions. 

In reply to by No Time for Fishing

F em all but 6 Tue, 12/12/2017 - 16:50 Permalink

How many people do any of you know in the top 39% tax bracket? Thats what I thought. This is the class that gets additional income from stocks and bonds that are not taxed at that rate. So who gets fucked? yup. You and me. The blue collar guys. Just a little more broken glass in the vaseline. You all get ready to turn around and grab your ankles cuz its cummin. Good and hard.

Mazzy F em all but 6 Tue, 12/12/2017 - 17:00 Permalink

There's the rub in all this tax rate nonsense.  Whenever the bobble heads talk about TOP tax rates, you have to realize that incredibly few people actually pay that, and even within that their EFFECTIVE tax rate is much, much, much lower due to where their differring sources of income are generated.You see, when cap. gains, dividends, and rental property income is taxed at a lower rate than what a serf goes out to produce (for a businessman who then gets to write it all off) you know that the country is broken.

In reply to by F em all but 6

ultraticum Tue, 12/12/2017 - 16:51 Permalink

This is what I am hearing through the noise:  Blah blah blah blah blah TAX blah blah blah blah REVENUE blah blah blah blah FAIRNESS blah blah blah blah COMPROMISE blah blah RE-ELECT ME.Just have the Fed print the money for wars and welfare and be done with it!

ug Tue, 12/12/2017 - 16:56 Permalink

Now they'll be able to claim it didn't work because they raise the rate from 20-21%.Republicans are sick money worshippers.

Mazzy Tue, 12/12/2017 - 16:57 Permalink

Feudal Japanese serfs rebelled against the Shogunate for having to give up a smaller portion of their produce to their feudal lords.37%?  We are getting our assholes reamed and they're telling us they're cutting us a break and doing us a favor.

MusicIsYou Tue, 12/12/2017 - 17:13 Permalink

Nah iust make it a 10% flat tax for everybody. The rich that like to profess they pay 90% of all taxes don't want a flat tax though. Gee I wonder why?