- WASHINGTON — Republican lawmakers unveiled the most sweeping rewrite of the tax code in decades on Thursday, outlining a $1.51 trillion plan to cut taxes for corporations, reduce them for some middle-class families and tilt the United States closer, but not entirely, toward the kind of tax system long championed by businesses.
I personally think the mortgage interest deduction should be killed entirely (phased out would probably be more reasonable). Anyway, anyone who buys a big house because they can "save" on their taxes is a moron of the highest order. Some very rudimentary arithmetic can show how wrong that is. MID is mostly a gift to the finance sector, and they already have plenty. At least $500,000 is a start. Funny that there's no mention of the carried interest loophole. That was one of Trump's stump speech regulars in the campaign. I said so myself many times that he was full of shit, but he repeated it so much even I started to believe the lie. Shame on me. Liar's gonna lie.
They're almost killing it with this proposal. The Tax Policy Center estimates that only 4% of households will claim the deduction if this bill is adopted. That's down from 21% under current law. Those 4% are almost entirely rich people with big mortgages (and some middle class people who have a lot of deductions). My guess is I'll no longer qualify for it, and that doesn't bother me. If my taxes are lower overall, that means I'm saving money--it's irrelevant where it comes from. Of course mortgage lenders, builders, and realtors are freaking out over this: they make their best commissions on large sales. In the current framework, the impact will be minimal, because so few households will be negatively impacted by it. It should only affect sales of expensive homes going forward (and even that should be minimal, since the first $500,000 still counts). If it has any negative impact on home values, it will be in a limited segment. We shall see how this shakes out when interest rates eventually rise. The slaughter of these sacred lambs probably will be the bill's undoing. The fact that they're capping state and local taxes is already causing Republican defections. They thought they could get away with it, because high tax states are blue, but of course it turns out that lots of the upper middle class people in those states are represented by Republicans. State and local deductions are another area where reform may make sense, since that amounts to a federal subsidy of states who decide to raise taxes (of course the other side of that coin is that these states are still overwhelmingly net donor states). Another aspect of this bill that will rip the GOP apart is the corporate tax cut. Their argument is that cutting corporate taxes will lead to increases in worker pay. Everyone pretty much knows that any cut in the corporate tax rate wont' lead to increases in pay or business investment, but rather to increases in dividends and stock buybacks. Real reform would cut business taxes while also putting in provisions that make it attractive to reinvest the savings. Nothing of the kind exists here. All-in-all this bill is a failure of reform, and I think for those reasons it will die just like healthcare "reform" did. The GOP has so many competing interests that can't be accommodated (because they're inherently contradictory--there are some genuine deficit hawks, even if we've seen that most of those people were lying throughout the Obama administration) that implosion is the most likely result. The only way this thing works is if all the deficit holdouts capitulate. As we saw with health, getting 96% agreement of GOP members is a tall order. (Apologies for the digression; I'm fascinated with this trainwreck of a bill.)
Leonhardt observed this morning that the principle characteristic of the bill is that it's a hurried mess. It's becoming increasingly clear that the Republican Party has little cohesiveness beyond opposition to the Democratic agenda and that when they are required to come up with a platform of changes, they can't agree on anything beyond "Democrats bad." Interesting times.
Interesting, indeed. It may be a useful strategy for Democrats to support certain parts of the bill publicly. They may find it easy to sew or encourage divisions within the GOP ranks. Instead of being the new party of "no" like the GOP opposition before them, perhaps they can be the party of "yes, and..." There are so many ideological red lines for conservatives that countermand other ideological lines for other conservatives, that it may be easier to foment infighting than to just be intransigent. At least, that's what I'd do.