Congress has a royal mess on its hands with competing Republican tax bills, both of which were slapped together and are not wearing well on closer examination.
Each new day reveals unintended consequences and structural flaws, the latest being a $300 billion “oops” on corporate taxes. In a frantic attempt to win votes, Senate Republicans scribbled fresh loopholes, workarounds and exceptions into their bill, giving lie to their claims of simplifying taxes. They’ve introduced greater uncertainty — the bane of good tax policy — with a complex set of permanent and temporary credits, rate reductions and other measures. Recently discovered in the House bill: a provision that would allow big donors to give unlimited amounts to independent political groups as tax-deductible gifts.
With nearly complete disregard for transparency, Republicans have jettisoned the usual vetting process of hearings, bill-scoring and careful analyses that might have given them a chance to perfect tax legislation which, after all, will touch every aspect of American economic life.
Republicans are entitled to seek tax reform. The country needs an updated tax code geared for a 21st-century economy that is simpler, does more to help the middle class and small businesses and that makes American corporations more competitive globally. The Senate bill, like the House version before it, fails to fully accomplish these goals. In their zeal to claim victory — any victory — Republican leaders have shut out not only Democrats, but those in their own party who have been sounding warnings.
In doing so, they also have done an about-face on another long-held principle, and one the Star Tribune Editorial Board has strongly supported over the years — deficit reduction. The Republican tax bills not only do not pay for themselves, they are projected to add well over $1 trillion to the country’s already supersized debt. After lavishing tax giveaways on high-income Americans, the next order of business is quickly shaping up: cutting the health and anti-poverty programs that are lifelines for the nation’s poor, disabled and elderly. Deliberately inflating the deficit with tax cuts, then using it as an excuse to hack away at vital programs is irresponsible and cruel.
The tax bills have another victim in their sights: blue states, which would see an end to the deductibility of most state and local taxes used by hundreds of thousands of Minnesotans. This is a blatant attempt to penalize states whose citizens have chosen to pay taxes for better roads, schools, health care and other services. Republicans assert that the deduction gives blue states an advantage over low-tax states. What they fail to note is that those states, including Minnesota, already pay more in federal taxes than they ever get back. According to the Tax Foundation, Minnesota ranks 44th in federal aid as a percentage of state general revenue. Compare that to low-tax Mississippi, which gets more than 40 percent of its revenue from the federal government.
Further complicating matters is the still looming prospect of a government shutdown. It may control the executive and legislative branches, but the GOP has been unable to manage necessary negotiations on the debt ceiling. A quick vote recently bought two more weeks before the holidays — when most lawmakers would rather be home with their loved ones. But that means both the debt ceiling talks and tax reform will be going on simultaneously, lessening the chances of thoughtful legislation.
Americans deserve better. Before they make decisions that could hurt those they claim to help, Republicans should take another, more measured approach to tax reform in the new year.