Tea-Publicans have been scheming for their tax cut plans for corporations and their plutocrat campaign donors for years, so it would be fair to assume that they had taken the time to work through all of the tax consequences and to get the language of the bill right.
This assumption would be entirely wrong.
In their haste to pass the GOP tax bill in the Senate last week, which included illegible handwritten changes made in the margins of the bill added at the last minute, Tea-Publicans made a number of mistakes that add up to billions of dollars if not corrected.
You’re shocked, I’m sure.
Jordan Weissmann at Slate finds Senate Republicans Made a $289 Billion Mistake in the Handwritten Tax Bill They Passed at 2 a.m. Go Figure.
It appears that Senate Republicans managed to make a $289 billion or so mistake while furiously hand-scribbling edits onto the tax bill they passed in the wee hours of Saturday morning. The problem involves the corporate alternative minimum tax, which the GOP initially planned to repeal, but tossed back into their stew at the last second in order to raise some desperately needed revenue. The AMT is basically a parallel tax code meant to prevent companies from zeroing out their IRS bills. It doesn’t allow businesses to take as many tax breaks but, in theory, is also supposed to have a lower rate.
Except not under the Senate bill. When Mitch McConnell & co. revived the AMT, they absentmindedly left it at its current rate of 20 percent, the same as the new, lower rate of the corporate income tax that the bill included. As a result, many companies won’t be able to use tax breaks that were supposed to be preserved in the legislation, including the extremely popular credit for research and development costs. Corporate accountants started freaking out about this over the weekend, but the situation reached high farce when a group of lawyers from Davis Polk pointed out that, by leaving the AMT intact, Republicans had essentially undermined their bill’s most important changes to the international tax code.
Keeping the AMT was supposed to raise $40 billion, but that already appears to be a gross underestimate. (The figure came from Congress’ Joint Committee on Taxation, whose analysts I can only assume were running on Red Bull and fumes while trying to provide the GOP with last-minute scores.) NYU Law professor and tax expert Lily Batchelder concludes that the AMT will actually cost companies at least $329 billion—good for limiting the blow to the deficit, bad for the corporations who are supposed to be stumping for this legislative Frankenstein—just based on the value of the R&D credits and international exemptions that have been rendered useless.
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On the bright side, this mammoth screw-up will make it harder for the House to simply pass the Senate’s bill if the GOP’s conference committee hits a wall. Republicans have to enact something that fixes this, lest they tick off the very donors this legislation was meant to appease.
Business Insider also reports, Experts are starting to find massive errors in the GOP tax bill after it went through Congress at lightning speed:
As Republicans hurtle toward making their massive tax plan into law, experts are starting to find a slew of errors they say are most likely the result of a rushed process.
Republicans have argued that the plan is the culmination of years of work. But the resulting bill has moved through both chambers of Congress at legislative light speed.
The House passed its version of the bill, named the Tax Cuts and Jobs Act, two weeks after rolling it out. The Senate got its version through in three weeks — including one off for Thanksgiving.
Given the breakneck speed and last-minute dealmaking — Senate Republicans were making handwritten changes to the bill hours before passing it — it’s no surprise that experts have discovered complications in the immediate aftermath of the legislation’s passage.
Perhaps the biggest is in the Senate bill, which at the last minute kept intact the corporate alternative minimum tax.
As The Wall Street Journal’s Richard Rubin noted, leaving the corporate AMT could have major consequences for businesses, such as eliminating the benefit of the research and development tax credit.
The change was so sudden that some experts say the nonpartisan Joint Committee on Taxation, Congress’ official scorekeeper, may have understated its potential effect.
Lily Batchelder, a tax-law professor at New York University who was formerly a deputy director of the National Economic Council, tweeted on Tuesday that any change to the corporate AMT would significantly affect revenue.
Batchelder said that repealing the corporate AMT could cause a revenue shortfall of an additional $300 billion. That would force Republicans to find more revenue in other places — through taking away deductions or increasing rates, for example — to fit their tax bill into a specific budget window.
Brian Faller at Politico captures this trainwreck of a tax bill best with this headline: ‘Holy crap’: Experts find tax plan riddled with glitches:
Republicans’ tax-rewrite plans are riddled with bugs, loopholes and other potential problems that could plague lawmakers long after their legislation is signed into law.
Some of the provisions could be easily gamed, tax lawyers say. Their plans to cut taxes on “pass-through” businesses in particular could open broad avenues for tax avoidance.
Others would have unintended results, like a last-minute decision by the Senate to keep the alternative minimum tax, which was designed to make sure wealthy people and corporations don’t escape taxes altogether. For many businesses, that would nullify the value of a hugely popular break for research and development expenses.
Some provisions are so vaguely written they leave experts scratching their heads, like a proposal to begin taxing the investment earnings of rich private universities’ endowments. The legislation doesn’t explain what’s considered an endowment, and some colleges have more than 1,000 accounts.
In many cases, Republicans are giving taxpayers little time to adjust to sometimes major changes in policy. An entirely new international tax regime, one experts are still trying to parse, would go into effect Jan. 1, only days after lawmakers hope to push the plan through Congress.
“The more you read, the more you go, ‘Holy crap, what’s this?’” said Greg Jenner, a former top tax official in George W. Bush’s Treasury Department. “We will be dealing with unintended consequences for months to come because the bill is moving too fast.”
House Ways and Means Chairman Kevin Brady (R-Texas) said he’s aware of problems, and that lawmakers aim to address them as part of negotiations over a final plan.
“We’ve gotten really good feedback on how best to fine-tune it,” he said. “It’s really showing us where we need to land, and the issues we need to improve in conference.”
Part of writing any tax legislation, tax veterans say, is trying to anticipate how clever tax lawyers might game a proposal, how seemingly disparate sections of the code might interact in unexpected ways and how to address taxpayers’ sometimes unusual circumstances.
It’s not possible for lawmakers to foresee every eventuality, and it’s hardly unusual for there to be mistakes Congress later corrects.
What is unusual is the sheer scope of the legislation now before lawmakers, and the speed with which it’s moving through Congress. Republicans are trying to muscle the plan through the Capitol before special interest groups can mobilize opposition.
The House passed its draft of the proposal, from introduction to final vote, in two weeks flat. The normally balky Senate needed barely three weeks to move its plan.
By comparison, it took Democrats more than six months to pass the Affordable Care Act.
That breakneck pace means there hasn’t been much time for feedback from experts outside the Capitol.
“You can never catch all the implications,” said Jenner. “That problem is magnified exponentially when you’re rushing through like this.”
But many of the issues are complicated, and lawmakers are in a hurry.
Trump wants negotiators to wrap up their work even before a Dec. 22 deadline they’ve set for themselves. “We want it to proceed as quickly as possible,” Marc Short, the administration’s congressional liaison, said Tuesday.
What’s more, some of the fixes could be expensive, potentially throwing lawmakers’ budget numbers out of whack.
Republicans may try to pass subsequent legislation to address problems, but that may not have the ”reconciliation” protections — a set of complex rules in the Senate that allow them to shut off Democratic filibusters — on which they’re now relying to move their plan through the chamber. That would enable Democrats to block any fixes.
Lawmakers could also punt some of the issues to Treasury to figure out with government regulations. But that’s typically a slow process, and most of the Republican plan would take effect Jan. 1.
Republicans are well aware of the corporate AMT problem and appear likely to address it in conference, with House Majority Leader Kevin McCarthy (R-Calif.) demanding a fix.
“That should be eliminated, for sure,” he told CNBC on Monday.
But experts say there are plenty of other issues.
Their plans to cut taxes on pass-through businesses would open a whole new palette of complicated tax-avoidance techniques allowing the well-to-do to slash their taxes, lawyers say.
People will be tempted to recharacterize their income in order to take advantage of a 23 percent deduction for pass-throughs offered by the Senate. For someone making $500,000, that would save them $30,000.
“This is an entirely new concept and, from a tax lawyer’s perspective, it’s like a new paint box,” said David Miller, a tax partner at Proskauer Rose LLP. “We have a new tool to play with.”
At the same time, an apparent bid by the Senate to head off tax-avoidance moves involving business losses would dissuade people in certain circumstances from starting companies — though one of the main purposes of the legislation is to improve the business environment, said Don Susswein, a principal at the tax and accounting firm RSM.
“That’s a good example of a provision that was undoubtedly well-intentioned, trying to solve a very narrow problem, but maybe they didn’t have the time to really get it right,” he said. “Hopefully, it will be closely examined in conference.”
Republicans themselves acknowledge one glitch. In a report accompanying their legislation, House Republicans essentially say they screwed up the details of how a one-time tax on multinational companies’ offshore profits would work and plan to fix it.
“The committee is aware that certain aspects of this section require additional attention,” the report says, and will revise the plan to avoid “inappropriate” results.
Other issues arise from the fact that lawmakers are mostly skipping the custom of having a transitional period between current tax rules and the new ones, in order to give the public time to adjust to the changes.
The House bill also includes a whole new way of taxing multinational corporations — aside from the one-time tax — that lawmakers have hardly debated, and which experts are still trying to understand.
“It’s crazy,” said one Republican lobbyist. “I don’t think anyone could explain it, let alone comply with it” by Jan. 1.
And why is this legislative malpractice occuring? Because Tea-Publicans in Congress and president Donald Trump do not have one major legislative victory this year, despite having complete control of the government, and they need a “win” (for them, not for the American people). The one thing that their plutocrat campaign donors demand to be passed is the tax cuts for corporations and plutocrats bill.
