Connect with us


House GOP passes Tax Cuts 2.0, favors rich, Senate likely won’t vote



paul ryan donald trumpDrew Angerer/Getty Images

  • The House passed the GOP’s “Tax Cuts 2.0” package on Friday.
  • The centerpiece of the three-bill package was a measure to
    extend the individual tax cuts form last year’s Tax Cuts and Jobs
  • Those individual cuts are currently set to expire after 2025,
    but the new bill would make them permanent.
  • According to tax experts, the extension would offer a small
    boost to economic growth in the short-term, give most of the
    gains to wealthier Americans, and substantially increase the
    federal deficit.
  • Due to Senate rules, the House bill is likely dead on arrival
    in the upper chamber.

House Republicans passed a major tax reform package on Friday,
known as the “Tax Cuts 2.0” package, in an attempt to follow up
on last year’s massive tax-cut effort.

While the package will now head to the Senate, it’s likely that
the second tax cut is dead on arrival in the chamber.

What’s in the package?

The Tax Cuts 2.0 package is three separate bills: The American
Innovation Act, the Family Savings Act, and
the Protecting Family and Small
Business Tax Cuts Act of 2018.

The centerpiece is the third bill, which would extend the
individual tax cuts from last year’s Tax Cuts and Jobs Act, or

Republicans were forced to choose last year whether to make
permanent corporate tax cut or individual tax cuts, due to Senate
rules around the federal deficit. To have the bill qualify under
the rules, the GOP chose to let the individual cuts to expire
after 2025 while making corporate cuts permanent.

The Protecting Family and Small
Business Tax Cuts Act would extend the individual
cuts into 2026 and beyond. The bill passed the House by
220-191 vote, with three Democrats voting for the
bill and 10 Republicans voting against it.

The other two other elements of the package, which would
change the tax treatment for certain retirement accounts and
allow businesses to deduct start-up costs, passed by wider
margins of 240 to 177 and 260 to 156 respectively. 

What would be the effects of Tax Cuts 2.0?

Similar to the TCJA
, most independent analyses show the bill
would provide a modest boost to the US economy in the short-term,
while the benefits would be tilted toward wealthier Americans.

According to the Tax Policy Center (TPC)
, a nonpartisan think
tank, the individual tax cut extension would cut taxes for
American households by $1,600 on average in 2026. But the gains
would not be shared equally among different income cohorts.

The bill to extend the TCJA’s individual and estate tax
cuts has the same structural flaws as the original. It is an
enormous budget-buster that primarily benefits high-income
households,” Howard Gleckman, a senior fellow at TPC,

  • For example, households in the lowest income quintile
    (households making up to $28,600) would receive an average tax
    cut of $100, or a 0.5% boost to after-tax income.
  • Those in the middle-income quintile (incomes
    of 54,800 to $95,000) would get an average cut of $980, a
    1.3% average boost to incomes.
  • People in the top 1% of income earners
    (making $836,200 and up) would get an average cut of
    $40,180, a 2% boost to after-tax income.
  • Additionally, while most people — around 66% of households —
    would receive a tax cut, roughly 9% of households would actually
    see their tax bills increase due to the elimination of some tax
  • The other 25% would see a change in their tax bill of $100 or

The TPC and the conservative-leaning Tax Foundation also
estimated that the bill would boost economic growth, but they
differ on how much. The TPC estimated a 0.5% GDP boost in 2026,
0.4% in 2028, and 0.1% in 2038. On the other hand, the
Tax Foundation estimated
the extension would boost GDP by
2.2% over the long-run.

The package would also add to the federal deficit. According to
the Joint Committee on Taxation, the extension of the individual
tax cuts alone would
add $545 billion to the federal deficit
between 2019 and 2028
when factoring in the economic boost from the law.

TPC estimated
that the entire package would add $631 billion
to the deficit through 2028 and another $3.8 trillion from 2029
to 2038.
The Tax Foundation estimated
that the move would decrease
federal revenues by $576 billion through 2028 and $113
billion every year afterwards even when factoring in the economic
growth benefits.

Is this going to become law?

Probably not.

The TCJA was able to make it through the Senate despite the GOP’s
narrow majority because Republicans used a procedure known as
budget reconciliation. This meant that the bill only needed a
majority vote in the Senate and was not subject to a filibuster.

By contrast, Tax Cuts 2.0 is being advanced outside of the budget
reconciliation process and would need 60 votes to avoid a
filibuster. Given the GOP’s 51-49 seat margin in the Senate, this
would require nine Democrats to support the bill.

Even if Republicans could pick up a few votes from across the
aisle, it is not clear that every GOP senator would even support
the package. Many Republican members, such as Sen. Bob Corker,
were barely able to stomach the TCJA’s contribution to the
federal deficit and the prospect of adding another heap of debt
could be a nonstarter.

Jon Traub, managing principal
at Deloitte’s Tax Policy Group, wrote after the
House passage that there is unlikely to be more movement.

This may be the last action we see taken on this issue in
2018, as its unlikely those changes would get to the White House
this year,” Traub wrote.

Continue Reading
Advertisement Find your dream job