House Narrowly Approves Tax Cut
WASHINGTON – House Republicans narrowly pushed through a major overhaul of the federal income tax code today that would reduce taxes for corporations and individuals, but runs the risk of adding $1.5 trillion during the next decade to the already swollen federal debt.
By a vote of 227 to 205 — with 13 Republicans voting no — the House the Republicans Thursday managed to keep alive their promise of overhauling the tax code despite the unanimous opposition of House Democrats. But the bill faces an uncertain future in the Senate where Republicans control the chamber by a slender margin of 52-to-48.
The Senate Finance Committee is drawing up its own version of a tax bill which includes major differences from the House bill on such issues as deducting state and local taxes. The Senate would eliminate all state and local tax deductions while the House bill would permit Americans to deduct as much as $10,000 annually in property taxes.
In an interview Thursday on Bloomberg TV, Sen. Rob Portman, R-Ohio, predicted when the House and Senate reconcile the differences in their bills, the $10,000 cap on property taxes “is probably where this ends up.”
In a statement from the White House, President Donald Trump called the House vote “a big step toward fulfilling our promise to deliver historic tax cuts for the American people by the end of the year.”
Republicans Pat Tiberi of Genoa Township, Steve Stivers of Upper Arlington, Bob Gibbs of Lakeville, Jim Jordan of Urbana, Bill Johnson of Marietta, Mike Turner of Dayton, Brad Wenstrup of Cincinnati, Warren Davidson of Troy, and Steve Chabot of Cincinnati voted for the bill while Democrats Joyce Beatty of Jefferson Township, Tim Ryan of Niles, Marcy Kaptur of Toledo and Marcia Fudge of Cleveland opposed it.
In a statement moments after the vote, Tiberi said “this is an historic effort. Today, the House did its job. Next, the Senate must do theirs. We cannot let this once-in-a-generation opportunity go to waste.”
Rep. Bob Gibbs, R-Lakeville, said the bill “makes filing taxes fairer and simpler for individuals, spurs economic growth by making American companies more competitive, helps create jobs and increase wages.”
By contrast, Beatty said in a statement that she “stood with seniors, veterans, students, teachers and countless families by voting against the short-sighted Republican tax scam bill.”
House Republicans have been under intense pressure to approve a bill that reduces tax rates and simplifies the tax code. They have been warned by their pollsters that if they fail to produce a tax bill, they could lose the House in next year’s election.
Former House Speaker John Boehner, R-West Chester, said he has not “seen congressional Republicans this determined to get something done in years. There is still a lot of work ahead. But I think they can do this. And if they do it, it will be good for the economy. ”
The drawback is Republicans who so sharply criticized rising debt during the presidency of Barack Obama are now willing to tolerate debt loads not seen since the end of World War II.
Ryan said “these tax breaks for millionaires and billionaires will blow a massive hole in our deficit and will mean drastic cuts to important programs,” adding “this tax plan will not make America great, it will make America worse for everybody who is not already rich.”
According to the nonpartisan Congressional Budget Office, under current law and assuming tax rates do not change, the federal government is expected to add nearly $10 trillion to the nation’s publicly held debt, money owed through the sale of treasury bonds and other notes to private and public investors.
Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, said in a statement: “The House approved debt-financed tax cuts based on predictions of magical economic growth that defy history and all credible analyses. Tax reform should grow the economy and not add to the debt. Unfortunately, lawmakers are assuming faster economic growth will pay for that debt increase when there is no evidence it will cover more than a fraction of the tax bill’s costs.”
Portman and other Republicans have argued that reducing taxes, particularly on companies, will expand economic growth, raise wages and increase tax receipts to the federal government.
But when Republicans reduced taxes in 1981 and 2001, the budget deficit soared. By 1983, the federal deficit had risen to $207 billion compared to $40.7 billion in 1979. In the aftermath of the 2001 tax cut — combined with the economic downturn exacerbated by the 2001 terrorist attacks — the government surplus of $128 billion of 2001 was transformed into a $377 billion deficit in 2003.
The House bill reduces the number of income brackets for individuals from seven to four — 12 percent, 25 percent, 35 percent and 39.6 percent — the latter for American households with annual income of $1 million or more.
It also slashes the corporate income tax rate from 35 percent to 20 percent and reduces taxes on many small businesses to 25 percent.
The measure increases the per-child tax credit from $1,000 to $1,600. But it also scraps the $4,050 personal exemption that Americans can take for every member of their household.
Instead, the Republicans want to simplify tax returns by increasing the standard deduction, which is the amount people who don’t itemize can deduct from their income.