Senate GOP accidentally killed corporate tax deductions

Republicans are talking about having Jeff Sessions run against embattled GOP Senate candidate Roy Moore

Poor corporations. The moral is, let everyone see the drafts and hold hearings! See what happens when you rush?

This screwup — like most of the tax plan’s oddest features — was born of a math problem. Due to arcane Senate rules, the Trump tax cuts can only add $1.5 trillion to the deficit over the next decade. Last Thursday, the Senate tax bill already cost about that sum, and then McConnell started making expensive promises to his few holdouts. Susan Collins wanted a $10,000 property tax deduction for Americans in high-tax states; Ron Johnson wanted a 23 percent business-income deduction for the company that his family owns. This left the Senate Majority Leader searching under the tax code’s couch cushions for new sources of revenue.

Eventually, he came upon the corporate alternative minimum tax (AMT). At present, most corporations face a 35 percent (statutory) rate on their income. But by availing themselves of various tax credits and deductions, most companies can get their actual rates down far below that figure. To put a limit on just how far, the corporate AMT prevents companies from paying any less than 20 percent on their profits (or, more precisely, on the profits that they fail to hide overseas).

The GOP had originally intended to abolish the AMT. But on Friday, with the clock running out — and money running short — Senate Republicans put the AMT back into their bill. Unfortunately for McConnell, they forgot to lower the AMT after doing so.

This is a big problem. The Senate bill brings the normal corporate rate down to 20 percent — while leaving the alternative minimum rate at … 20 percent. The legislation would still allow corporations to claim a wide variety of tax credits and deductions — it just renders all them completely worthless. Companies can either take no deductions, and pay a 20 percent rate — or take lots of deductions … and pay a 20 percent rate.

With this blunder, Senate Republicans have achieved the unthinkable: They’ve written a giant corporate tax cut that many of their corporate donors do not like.

3 Responses to Senate GOP accidentally killed corporate tax deductions

  1. Imhotep December 5, 2017 at 11:53 am #

    Actually this would be a very good deal IF the corporate tax rate was increased to 40% (or kept at 35%) and every deduction was eliminated as well.

    That would be a Democratic plan that we could all support.

    More bad news.

    The FED’s goal of increasing inflation to 2% has been met.
    Unfortunately, all of the inflation comes from a cost of goods increase and not an increase in workers wages.

    FED policy has succeeded in increasing the prices at the grocery store by 2%, but it did nothing to increase workers wages so that they could keep up with the higher prices on goods and services.

    The rich get richer and the rest of us can go to hell because we spend all of our money on “women, booze and movies.”

  2. Nicely-Nicely December 5, 2017 at 12:19 pm #

    I was hoping their incompetence would make it’s usual appearance. The whole House reconciliation thing should be a clown show as well.

  3. Martigan December 5, 2017 at 6:12 pm #

    Note that many corporations pay an effective tax rate of 0-5%. A flat 20% with or without deductions is a huge tax increase on most corporations, since none of them ever paid full ‘sticker’ price. Them dad-gumm rethugs screwed up and did something right.

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