The high-speed race to produce a Republican tax cut for corporations and the wealthy is almost certain to come with another round of massive cuts for the same groups.
With Republicans in Congress on the verge of a vote on the biggest tax overhaul in decades, tax scholars are concerned that parts of the hastily-crafted bill could create opportunities for wealthy taxpayers to exploit loopholes and game the US tax system—and add on to the growing deficit.
The slapdash construction of the Republican plan, with multiple kickbacks, hurried revisions, overnight rewards inserted to nail down votes, and chunks of the bill actually scribbled in the margins, has tax lawyers slavering over the expected ease of finding new ways to hide money. During the campaign, Donald Trump was very proud of the fact that he used loopholes to avoid paying not just some taxes, but any taxes for year, after year, after year.
“And I said, 'Well, that would make me smart,' because tax is a big payment. But a lot of people say, 'That's the kind of thinking that I want running this nation.'”
The way Trump explained it, it was his patriotic duty, as a smart American, to grab for every loophole, dodge, and just plain cheat he can find—that’s just being a “good businessman.” He also explained that only a Grade-A tax cheat, such as himself, could “fix” the system. But what he didn’t explain was how he meant to fix it.
The people most likely to exploit any new loopholes are those who have access to savvy advice—namely, corporations and taxpayers with relatively high incomes, not poor Americans.
The new tax plan not only gives 83 percent of its benefits to the top 1 percent, it leaves a whole new set of loopholes for them to exploit.
The GOP Tax Scam can STILL BE DEFEATED. Pick up the phone, and call your House & Senate members AGAIN at (202) 224-3121. Tell them to vote NO.
Some of the new gold-plated benefits in the Republican plan are already famous—like a special break for those who own private jets. And, of course, the plan maintains the special tax status for real estate development that makes it the go-to means of money laundering for autocrats and oligarchs everywhere. But that’s far from the biggest way the plan comes pre-loopholed.
Kamin, one of the report’s co-authors, points to one of the glitches already seen in the overhaul process: the last-minute inclusion of the corporate “alternative minimum tax” (AMT) in the bill the Senate passed in early December, which sparked outcry from the business community. Why? The alternative minimum tax rate was set at 20 percent, the same as the new corporate tax rate included in the Senate measure.
Which meant that corporations might actually have to pay 20 percent. Which would be quite a blow. Despite all the screaming over the “highest corporate rates” on the planet, the average US corporation pay is already below what what corporations in the rest of the G7 pay. Cutting those taxes to 20 percent would represent a drop of about 50 percent in tax paid … but that wasn’t enough for corporations that are already pouring over the new plan for ways to pay even less.
Just like that, the AMT was dropped. Now the corporate tax rate will top out at a fraction of what is paid in other nations, and only go down from there.
Oh, and while ordinary middle-class taxpayers will suffer from the inability to deduct state and local taxes, that’s another loophole that’s been pre-dug for the wealthy.
Unlike individuals, corporations under the Republican tax bills can also make deductions for state and local income taxes, heightening the incentive to start a corporation.
Anyone with the savvy to turn their personal income into corporate income will benefit from a much reduced tax rate, no minimum tax, state and local deductions, and a whole raft of new breaks yet to be discovered.
But everyone else, all those school teachers, factory workers, food service workers, coal miners—the group Republicans collectively know as “suckers”—will foot the bill.