GOP Tax Cut Bill: Bad News and Good

A friend asked why this website has been ignoring the GOP Tax Cut Bill. Confession: I’ve been tweeting more than blogging — https://twitter.com/ search for @Oglesby Pat, mostly making three non-mainstream points, reproduced below: The Repatriation Tax Amnesty (“Holiday”) would prove an easy source of gimmicky revenue, the 280E marijuana tax would not be repealed, and the alcohol tax cut is shameful. Yes, I’ve fallen prey to “short-term, dopamine-driven feedback loops” of social media – and to laziness.

OK, here goes for the Tax Cut Bill overall, with bad news and good.

Bad news: The GOP tax bill is the worst tax bill I’ve encountered. We will borrow more money we won’t pay back (in sound dollars). Tilting to the rich, the bill will make the poor poorer.

Good news:  This tax cut bill won’t stand the test of time.  

For one thing, the GOP has taken the position that to the victor belong the spoils, so they are taxing Democrats. That position will be reversed as Democrats fight back and Independents see that the GOP has created a new swamp that needs draining.

For another, the Tax Cut Bill has unworkable and unprincipled rules that will need fixing. Unworkable: Its “pass-through” rules for S Corps and LLCs will tempt millions of small businesses to play games and risk audit. Unprincipled: It taxes architects more than doctors. (If that has a principle, please tell me.)

Unworkable rules will make tax lawyers moderately rich. But this is boring, unfulfilling work – Turning A into B. As my hero Charles Kingson said about the unworkable transfer pricing rules for multinational corporations, “Deciding how much one’s left hand contributes to one’s right may constitute a career, but not much of a life.’’

A caveat to this analysis:  This bill may be so bad that it causes the income tax to collapse.  But I bet not.

Here’s the bill, with  explanation at the end:  http://docs.house.gov/billsthisweek/20171218/CRPT-115HRPT-466.pdf.  The New York Times and the Wall Street Journal are covering the bill well for the general reader (though paywalls loom).

+++

Here are some links and edited tweets, suitable for skimming:

If you’re a tax person, you might start seeing tax professors spot structural defects:  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3084187 (Senate);
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3089423 (Conference).

Popular reporting:

A Look at Some Winners and Losers Under the GOP Tax Plan
By THE ASSOCIATED PRESS
https://www.nytimes.com/aponline/2017/12/16/us/politics/ap-us-tax-overhaul-winners-and-losers.html?partner=IFTTT&_r=0

+++

Simplicity Was A Main Goal of Tax Reform. For Millions, It’s Not Happening

The near-doubling of the standard deduction will make filing easier for millions, but the business-rate cut opens the door to complex gaming by millions as well

https://www.wsj.com/articles/simplicity-wasa-main-goal-of-tax-reform-for-millions-its-not-happening-1513367297?reflink=e2twmkts

+++

  • Tweets:
  • 
Pass-through rules are arbitrary and unworkable.
  • Is the “shrink-Uncle-Sam-until-you-can-drown-him-in-the-bathtub” crowd intentionally undermining the income tax?
  • There is at least reckless disregard for its integrity.
  • Philip Hackney


@EOTaxProf
Replying to ‪@OglesbyPat‬ ‪@lenburman‬ 
 And did you see how the GOP took favor on architects and engineers but not on doctors and lawyers in the final bill.
  • [PO tweet:]
  • Some of my friends in the cannabis community argue for repeal of 280E:
  • Parity!
  • Let marijuana businesses pay income tax like milk businesses.
  • But GOP’s taxing architects more than doctors makes the marijuana argument . . . go up in smoke.
  • If you wanted to destroy the income tax, making it unprincipled and unadministrable might be a useful tactic.
  • (Pass-through rules.)
  • So I was in a tax “silo,” unable to convince some folks who are in a cannabis “silo” that a 280E tax cut had no chance of happening this year.
  • (I’ve been saying 280E is overbroad since 2013:
  • ‪https://www.com/entry/marijuana-advertising-the_b_3810341.html ….)
  • ‪#marijuana
  • 

Aaron Houston


@HoustonAaron
Replying to ‪@OglesbyPat‬ ‪@tomangell‬ 
We’ll find out later today (perhaps) for sure. Of course, I agree with your assessment, Pat. From what some folks in the industry were saying, you would have thought it was a done deal, which seemed to reflect a misunderstanding of the process and politics.
  • Bill cuts alcohol taxes, so public health advocates lose.
  • It takes 24 pages (starting on 316) to cut beer, wine, and liquor taxes.
  • Excise taxes aren’t simple?
  • ‪http://house.gov/billsthisweek/20171218/CRPT-115HRPT-466.pdf …
  • Tax cut for beer, wine, and liquor wouldn’t fit under
  • “Individuals and Families” or
  • “Job Creators” or
  • “Energy Security and Economic Growth.”
  • Replying to ‪‪@HoustonAaron ‪‪@tomangell 
Honestly, Aaron, I was prepared to be surprised, but don’t know anyone who came from the tiny and insular world of federal tax legislation who thought a 280E marijuana tax cut had a chance this year.
  • Yes, repatriation recapture is a budget gimmick, but it doesn’t create unfortunate incentives (except the incentive to try to characterize assets as non-cash).
  • Mutual funds = Asset diversification for everyone. (IRC 852.)
  • Donor-advised funds = Appreciated asset basis ploy for everyone.
  • GOP bill pass-through rules = Transfer pricing tax abuse for everyone.
  • 
Bay area = anti-Trump territory.
  • Heavy repatriation tax is needed as toll charge for territoriality.
  • 


Big business is holding US jobs hostage — Trump should not pay the ransomOPINION | There is an easier way to “make America great again.”
com


  • Former JCT tax staffer’s Nov. 30 prediction: Holiday = “Sitting Duck!” ‪https://com/OglesbyPat/status/936333492048318464 …
  • Repatriation is the easiest tax money on the horizon.
  • One-time gimmick that multinationals, who still come out way ahead, will not kill the bill over
  • ‪https://com/OglesbyPat/status/936617284516417536 …
  • 


Replying to ‪‪@NCIAorg ‪‪@Entrepreneur ‪‪@dispensariescom
  • “Things came close to changing. Sen. Cory Gardner, a Republican from Colorado, had a repeal of the amendment as part of the GOP tax plan passed by the Senate. However, at the last minute he pulled the proposal out of the legislation.”
  • No, 280E repeal was never close to happening:
  • 
If the populist base paid attention to international taxes . . .
  • Tax Repatriation Amnesty would disappear. 


Big business is holding US jobs hostage — Trump should not pay the ransom
OPINION | There is an easier way to “make America great again.”
thehill.com



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Author: patoglesby

From 1982 to 1990, I worked in tax policy for Committees of the United States Congress. In recent years, I was Adjunct Lecturer at UNC-Chapel Hill's Business School and then Adjunct Professor at its Law School.

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