Concerning media reporting on the republican tax bill, I am appalled by the lack of homework especially by television media. For the most part they seem to be parroting press releases. That is what motivates this post. I plan to update this post as information becomes available,
1. For a good summary read Robert Reich, The Huge Tax Heist.
2. A NYT Nov 2 Editorial, A Tax Plan for a New Gilded Age. My summary follows:
A. The primary goal of this bill is to slash taxes on corporate profits to 20 percent, from 35 percent.
Credible economists believe the benefits of the cuts would accrue nearly exclusively to shareholders and executives.
about $70 billion a year, or 35 percent of the benefits, would flow to foreign investors who own shares in American companies, according to Steven Rosenthal at the Urban-Brookings Tax Policy Center.
B. The bill would also lavish benefits on real estate partnerships, hedge funds and other pass-through businesses, which send their profits directly to their owners without taxes being withheld
Republicans want those business owners to pay taxes of just 25 percent on that income, rather than ordinary rates, which go up to 39.6 percent. Republicans argue that this will benefit small businesses. In fact, a large majority of small-business owners already have personal tax rates below 25 percent.
C. On personal income taxes, Republicans say they are simplifying and cutting taxes for most people. But that is not really true. They propose reducing the number of tax brackets to four, from seven, while raising the lowest bracket to 12 percent, from 10 percent. They want to double the standard deduction but eliminate personal exemptions. One new benefit that could help many families would be a $300 tax credit for tax filers and their dependents who are over 17, like an aged parent. Strangely, it would end after five years. By contrast, the bill’s cuts to corporate and other business taxes would be permanent.
The changes that could affect middle-class families the hardest include the elimination of the deduction for state and local income taxes. And the property-tax deductible would be capped at $10,000. Many people in high-tax states, like California, New Jersey and New York, would be especially hard hit.
One particularly hardhearted change would eliminate the deduction for medical expenses, which is primarily used by people with serious and chronic illnesses. Gone, too, would be important tax credits and deductions for college tuition and interest on student loans.
D. Unsurprisingly, the tax bill contains a couple of provisions that are designed to benefit the Trumps and others like them. It would get rid of the alternative minimum tax, which is paid primarily by upper-income families with lots of deductions. This tax accounted for a vast majority of the income tax Mr. Trump paid in 2005, according to a leaked copy of his return. The Trumps would also benefit from the bill’s proposed estate tax changes. That tax currently applies to inherited wealth above $5.5 million. Republicans would exempt wealth up to $11 million starting next year and eliminate the tax after six years. That would benefit the heirs of just 0.2 percent of people who die every year, but cost the government $269 billion over a decade.
3. A NYT Editorial by Paul Krugman, Trump’s $700 Billion Gift to Wealthy Foreigners. My summary:
Why is Donald Trump planning to give away $700 billion — that’s billion, with a “b” — to foreigners, no strings attached? You probably didn’t know that he’s planning to do this. In fact, he himself almost surely has no idea that he’s planning to do this. But it would be one clearly predictable consequence of the tax “reform” he and his congressional allies are trying to pass.
… the benefits from cutting corporate taxes would overwhelmingly flow into after-tax profits rather than wages, especially in the first few years and probably for a decade or more. And this in turn means that the main beneficiaries would be stockholders, not workers.
[in addition] these days there’s a lot of cross-border investment. In particular, as Steven M. Rosenthal of the Tax Policy Center notes — in a paper I found revelatory — around 35 percent of U.S. equities are now owned by foreigners, triple the level during the Reagan years.
What this means is that around 35 percent of a tax cut from an administration that proudly uses the slogan “America first” — $700 billion over the next decade — wouldn’t even go to Americans. Instead, it would be a windfall to wealthy foreigners, who would probably gain a lot more from the tax cut than U.S. workers. Oh, and it makes all that talk about allies not paying their “fair share” sound kind of silly, doesn’t it?
4. The Atlantic: How Trump’s Corporate-Tax Plan Could Send American Jobs Overseas. My summary (read the Atlantic article for a detailed example):
The Trump-GOP plan will also propose a minimum tax rate on foreign income, according to multiple reports. But whereas Obama’s plan (which ultimately didn’t become law) assessed a company’s taxation in each country individually, the Trump framework would come up with an average for all foreign earnings combined, a so-called “global minimum.”
This might seem like a small difference, but the design of their global minimum tax creates perverse incentives for companies to offshore jobs and shift profits to tax havens—outcomes that a per-country minimum tax would avoid.
This is a big flaw in Trump’s plan: The more an American company moves its profitable [US] operations to countries that have tax rates of 20 percent or higher—often rich countries that are seen as America’s economic competitors—the more that company can shift profits to tax havens without paying taxes on those profits. And the more that U.S. companies already take advantage of tax havens, the bigger the incentive they will have to offshore operations to other advanced countries: This provision of the GOP plan encourages companies to blend income from low-tax countries with that from higher-tax countries, completely avoiding paying money to the U.S. government.