WASHINGTON ― Most households would pay higher taxes a decade from now under tax legislation moving through the U.S. Senate, according to a new analysis.
The tax hike would occur largely because the Senate bill makes most of its individual cuts temporary in order to comply with budget rules. Higher taxes are wholly contrary to the GOP agenda, so Republicans say the cuts wouldn’t expire.
“Most of the time individual expiring tax cuts or deductions never expire, so I think it’s more of a procedural move than a long-term policy objective,” Rep. Mark Meadows (R-N.C.) told HuffPost on Wednesday.
Meadows is right: Most of the temporary tax cuts Congress passed during the George W. Bush administration were made permanent under the Barack Obama administration ― but not without some additional short-term extensions and last-minute congressional drama.
Households at every income level would get a tax cut in 2019 from the new Senate bill, according to a report released Thursday by the Joint Committee on Taxation, a nonpartisan panel that analyzes tax legislation for Congress. But the majority of plan’s individual cuts expire in 2025, so come 2027, households earning less than $75,000 annually ― which is most households ― would pay more.
Though the tax rates would revert to current law, filers would pay more because another provision in the bill ― a permanent one ― changes the way tax brackets are adjusted for inflation each year. The slower-rising brackets in the Senate bill would result in more households falling into higher tax brackets as incomes rise, bringing the treasury $134 billion in extra revenue.
Though the Senate bill makes its business tax cuts permanent, the individual cuts are temporary to comply with a rule that forbids legislation from adding to the federal budget deficit after 10 years. It’s a gimmick; no Republicans actually want any of the cuts to expire.
Sometimes temporary tax breaks do disappear, however. The Bush tax cuts fully repealed a tax on wealthy estates, but the repeal expired and the estate tax returned. Reduced income and capital gains tax rates for high earners also expired.
“Ninety-six percent of them stayed,” Meadows said, adding that he wasn’t worried about setting up another “fiscal cliff” drama. “I think we’ll address that long before it becomes a fiscal cliff.”
Meadows is chairman of the conservative House Freedom Caucus, which has been influential on major legislation. House Republicans’ support of the Senate legislation is important, since ultimately both chambers will need to agree on the same bill.
Rep. Pat Tiberi (R-Ohio), a member of the tax-writing House Ways and Means Committee, said the fact that the Senate bill’s tax cuts expire doesn’t bother him ― he mainly disliked that the Senate’s permanent corporate tax cut doesn’t kick in until 2019 instead of 2018 like in the House bill.
“What bothers me more is the phasing-in of the corporate rate,” Tiberi said.
The HuffPost Politics podcast talks tax reform in its newest episode on Thursday:
