The winners and losers in the GOP tax plan

Every tax bill yields winners and losers. The tax overhaul legislation Republicans are expected to release Friday afternoon is no different. Based on what’s known about the bill now, here’s how it breaks down.

Winners

— Many individual taxpayers, including the richest. The bill would cut individual tax rates and double the standard deduction to $12,000 for single people and around $24,000 for couples. That would mean a tax break for most Americans, at least in the next few years. Late in the game, GOP leaders cut the rate for top earners to 37 percent (from the current 39.6 percent).

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— Wealthy heirs. The estate tax threshold would get doubled to about $11 million for individuals and $22 million for married couples. Those whose inheritances would exceed those exemption levels would still get hit, since the plan wouldn’t end the estate tax as the House wanted, but there aren’t too many of them.

— Corporations and other businesses. The top corporate rate would move down to 21 percent from 35 percent, and shareholders and others with investment income would see their tax bills cut by one-third or more. Owners of businesses that are taxed at the same rates as individuals, from the corner grocery to the Trump Organization, would see their effective tax rate drop to less than 30 percent, at most, from as high as nearly 40 percent.

— Big U.S. companies that operate globally, like Apple and Microsoft. The United States would follow most other industrialized countries in switching to a “territorial” tax system, where overseas profits aren’t taxed at home. They’d also get a low, one-time tax rate when they bring home profits they’re holding abroad. However, that tax would be larger than expected, and they would face complex rules meant to discourage them from moving more money and operations abroad.

— Certain investors, particularly private equity firms. Investment fund managers wouldn’t have to reclassify their “carried interest” compensation — the share of investor profits that they get — from lower-taxed capital gains to ordinary income. Despite President Donald Trump’s vow to end what some consider a loophole, the only new limit fund managers would face is the amount of time they have to hold assets to qualify for the lower rate — three years instead of one year under current law.

— People with high medical expenses and adopted children. Taxpayers would be able to deduct the costs of medical expenses that exceed 7.5 percent of their adjusted gross income for this tax year and next. In 2019, the threshold would return to 10 percent, its current level. House Republicans had proposed fully scrapping the deduction. A credit for adoptions also remains on the books, a provision that the House had also targeted for elimination.

— College students and K-12 teachers. College loan interest would remain deductible, and tuition waivers for graduate students wouldn’t get counted as taxable income. Both had been on the chopping block. But an excise tax on large college endowments is expected to remain in the tax package, which opponents are saying could hurt college scholarships going forward. For lower levels of education, teachers would still be able to deduct some of their out-of-pocket expenses for school supplies they buy their students.

— Local governments, hospitals and housing. The legislation would preserve the tax-deductible status of private activity bonds. They are used by state and local governments for infrastructure, by hospitals that want to expand and for building affordable housing.

— Businesses that invest in equipment and other capital. Major manufacturers would benefit the most from a provision that would let businesses immediately write off the cost of new investments, known as full expensing. It would be on the books for five years before beginning to wind down under the bill, but backers expect it to get extended.

— GOP brass: Trump, House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell are finally checking a legislative victory box as the bill speeds across the finish line with seemingly minimal resistance. They spent months trying to repeal the Affordable Care Act but couldn’t do it, and now they’re on the verge of eliminating a big part of it — the requirement for everyone to have health insurance — in the tax bill. Expect them to tell voters ahead of next year’s midterm elections that the tax cuts are growing the economy and everyone wins. But …

Losers

— Top earners who live in high-tax states like New York, New Jersey and California. No one would more acutely feel the loss of the federal deduction for all state and local taxes and the new $750,000 cap on the home mortgage interest deduction, down from $1 million. A compromise on SALT would allow taxpayers to deduct property taxes and either income or sales taxes, with a combined limit of $10,000. But some lawmakers, particularly from the Northeast, still say it’s not enough for many of their constituents. Bottom line: The amount of their income that is taxable would increase.

Homeowners, mostly on the East and West coasts, could see their home values decline. It would also affect infrastructure and public services such as education, according to Americans Against Double Taxation, since raising revenue needed to fund the costs of governance would be harder if residents can no longer write off all state and local taxes.

— Certain service providers. Some pass-through businesses, including doctors and lawyers, would be precluded from the lower tax rates on pass-through income.

— Workers who depend largely on wages. Many of them would get a mostly minimal decrease in their marginal tax rate, compared to contractors and the self employed. This is due to the changes in taxation of pass-throughs, and some tax experts say people would try to game the system to take advantage of the pass-through deduction.

— Deficit hawks. The tax plan was built with a $1.5 trillion budget allowance for tax cuts that didn’t require offsets, which advocates have said would mostly be made up by revenue from economic growth. But a host of official estimates and outside analyses have shown otherwise, and there’s certainly concern that the real cost of the package would exceed that $1.5 trillion when individual tax cuts that are only scheduled to run for eight years get extended as expected.

— Preachers who want to politic from the pulpit. The long-standing ban on churches and other religious organizations endorsing political candidates would continue, despite an attempt by the House to use the tax bill to repeal it. Many evangelical Christian groups have been lobbying for years to get rid of the prohibition, and Trump had vowed earlier this year to “totally destroy” it. But the Senate parliamentarian ruled the repeal doesn’t meet the chamber’s rules, and so it was jettisoned.

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Ethics Committee launches investigation into Kihuen

Ruben Kihuen is pictured. | AP Photo

The freshman Nevada Democrat Rep. Ruben Kihuen is accused of harassing a campaign aide during his 2016 campaign. | Chase Stevens/AP

The House Ethics Committee launched an investigation into Rep. Ruben Kihuen over allegations of sexual harassment.

The freshman Nevada Democrat is accused of harassing a campaign aide during his 2016 campaign. He denies the allegations and has rejected calls for his resignation.

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GOP makes last-minute tax bill changes to win over holdouts

Sen. Marco Rubio is pictured | AP

The negotiators have agreed to expand the child tax credit at the behest of Sen. Marco Rubio, who announced that he would be a “no” unless the credit was made more generous. | Carolyn Kaster/AP Photo

House and Senate negotiators have agreed on last-minute changes to their sweeping tax measure to win over GOP holdouts — although it’s unclear whether it’ll be enough for a pair of Senate Republicans to come on board.

The negotiators have agreed to expand the child tax credit at the behest of Sen. Marco Rubio, who announced on Thursday that he would be a “no” unless the credit was made more generous. The refundable portion of the child tax credit was increased from $1,100 to $1,400, according to a senior Senate GOP aide.

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News of the changes leaked out as a joint panel of lawmakers from both chambers began signing the legislative text they intend to be the final version of tax reform. They plan to release that text publicly at the end of the day on Friday.

Still, Rubio and Sen. Mike Lee (R-Utah), who also wants a bigger child tax credit, said they’d yet to see the details.

“We have not seen bill text, and until we see if the percentage of the refundable credit is significantly higher, then our position remains the same,” a spokesperson for Rubio’s office said in an email.

But Sen. Rob Portman (R-Ohio), a member of the House-Senate conference committee on the tax bill told POLITICO he thought the pair would be satisfied.

“I think we were able to expand the credit to people on the lower end of the economic ladder, which is what was [Rubio and Lee’s] purpose,” Portman said, though he declined to go into specifics.

Senate Majority Whip John Cornyn (R-Texas) also said Friday he expects Rubio to vote for the bill.

“We are working with him,” Cornyn said in an interview on Dallas radio station KSKY. “I think he’ll eventually get there.”

Cornyn also said he expects Sen. Bob Corker (R-Tenn.), who voted “no” on the original Senate tax bill, to support the final version. He described Corker as “encouraged by the direction this House-Senate conference is going in.”

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Tillerson calls on Russia and China to pressure North Korea

Rex Tillerson is pictured. | Getty Images

Secretary of State Rex Tillerson walked back a previous offer of unconditional talks with North Korea, saying “North Korea must earn its way back to the table.” | Eduardo Munoz Alvarez/Getty Images

Secretary of State Rex Tillerson called out China and Russia on Friday in remarks at the United Nations Security Council, urging the two nations who most often partner economically with North Korea to do more to curtail the nuclear ambitions of Kim Jong Un’s regime.

And Tillerson walked back a previous offer of unconditional talks with North Korea, saying “North Korea must earn its way back to the table.”

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“Each UN member state must fully implement all existing UN Security Council resolutions,” Tillerson said. “For those nations who have not done so, or who have been slow to enforce Security Council resolutions, your hesitation calls into questions whether your vote is a commitment to words only, but not actions. For countries who have not taken action, I urge you to consider your interest, your allegiances and your values in the face of this grave and global threat.”

North Korea’s nuclear program has proven a thorn in the side of President Donald Trump’s foreign policy agenda, just as it has for his predecessors. The Kim regime has ramped up its nuclear and ballistic missile programs since Trump’s inauguration, test firing multiple missiles, including some that traveled over Japan, and conducting its sixth nuclear test last September, by far its most powerful to date.

North Korea’s most recent missile tests have indicated that the repressive state is capable of striking much, if not all, of the continental U.S. It is not clear though that the Kim regime has yet developed a nuclear warhead small enough to fit atop its longest-range missiles.

Trump has matched North Korea’s typical bellicose rhetoric with rhetoric of his own, pledging to attack it with “fire and fury like the world has never seen.” But he has also called on Russia and, to a greater extent, China, to further tighten the screws on Pyongyang in an effort to force the Kim regime to the negotiating table. China is by far North Korea’s largest economic partner as well as its patron on the world stage, while Russia also does some business with North Korea.

“We particularly call on Russia and China to increase pressure, including going beyond full implementation of the Security Council resolutions,” Tillerson said Friday. “Continuing to allow North Korean laborers to toil in slave-like conditions inside Russia in exchange for wages used to fund nuclear weapons programs calls into question Russia’s dedication as a partner for peace.”

“Similarly, as Chinese crude oil flows to North Korean refineries, the United States questions China’s commitment to solving an issue that has serious implications for the security of its own citizens,” he continued.

Trump said earlier Friday that he spoke with Russian President Vladimir Putin about North Korea during their Thursday phone call, where the president said he also thanked his Russian counterpart for his kind words during his annual press conference in Moscow. On North Korea, Trump said he urged Putin to do more.

“The primary point was to talk about North Korea, because we would love to have his help on North Korea,” Trump said. “China is helping. Russia is not helping. We’d like to have Russia’s help – very important.”

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