House Republicans couldn't squeeze all the tax cuts they wanted into their bill. So they are counting on future Congresses to prevent tax increases.
The bill, released on Thursday, creates a new $300 tax credit that can be claimed by each tax filer, spouse and nonchild dependent. But the bill also sets a Dec. 31, 2022, expiration date for that tax credit and uses inflation-indexing rules that erode the value of other tax breaks.
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Those decisions help the House bill stay within its budgetary cap of $1.5 trillion in tax cuts over a decade and show significant savings for middle-income families in 2018. But for many, those tax cuts shrink and then vanish over time.
And by 2024, as a whole, individuals would pay higher taxes under the GOP plan than they would if Congress did nothing, according to the Joint Committee on Taxation. That estimate doesn't count the cuts in estate taxes and in the new rate on so-called pass-through businesses.
Taxpayers shouldn't worry, Republicans say, because future Congresses will prevent the tax credit from vanishing.
"It will never go away," said the bill's author, House Ways and Means Committee Chairman Kevin Brady (R., Texas).
Rep. Carlos Curbelo (R., Fla.), said he thought members of both parties would ultimately support extending the break.
"That family credit is de facto permanent and you can take that to the bank," Mr. Curbelo said. "Our budget process here forces us to maneuver the accounting of legislation, and there's certainly evidence of that in the bill."
The decision to let the family credit expire isn't a requirement. It is the byproduct of other Republican choices and priorities.
They capped the tax cut at $1.5 trillion over a decade. They prioritized a permanent corporate tax rate cut, which they expect to produce the most long-run economic growth. And they repealed per-person personal exemptions that people can subtract from their income. To prevent too many households from getting tax increases in 2018 and subsequent years, they created the family credit but didn't have enough money left over to make it permanent.
"The corporate tax breaks in the Republican plan are permanent -- written in ink, set in stone, locked in place with the key thrown away," said Sen. Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee. "But families have to settle for temporary tax cuts."
Temporary tax cuts worked well, politically, for Republicans in 2001 and 2003, under President George W. Bush. They set expiration dates, and when the expiration dates came, Congress pushed them into the future.
Jason Furman, who was Mr. Obama's chief economic adviser, noted that Republicans had complained before the bill's release about the assumptions that tax analysts were making to calculate the impact of GOP tax plans.
"Now, Republicans are complaining that critics are taking their legislation seriously," he said. "Households and businesses both need certainty and predictability and will not have that with a costly, rushed, gimmicky plan that raises taxes on many middle-class households to pay for estate tax cuts."
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(END) Dow Jones Newswires
November 03, 2017 17:07 ET (21:07 GMT)