House Passes Tax Reform Bill

Rachael Slobodien - November 18th, 2017

This the House of Representatives took a significant step towards reforming our nation’s broken tax code when it passed the “Jobs and Tax Cuts Act.”  Ahead of the vote, Club for Growth released a key vote alert urging members to cast a “YES” vote for the legislation.  The bill passed the House by a vote of 227-205, with thirteen Republicans – mostly from high-tax states - ultimately breaking ranks and voting against final passage.

 

The House bill is significant because it slashes the corporate tax rate, enacts full expensing and a territorial tax system, ends the Death Tax, cuts marginal tax rates for individuals, and eliminates several loopholes and deductions, including a partial elimination of the unfair state and local tax deduction (SALT).

 

However, Club for Growth appropriately recognized the House’s “Jobs and Tax Cuts” Act legislation was not without faults.  Now that the House has passed its bill and ahead of the Senate passage, Club for Growth strongly urges Republican leaders to fix the problems in the bill.  For example, the House’s bubble rate for high-income earners should be eliminated as well as the 39.6 percent top tax rate.  The conference report in the Senate  must include repeal of the dreaded individual mandate.  If these changes are incorporated into the final bill, passed by Congress, and signed into law by President Trump, we believe the economy will roar.  Club for Growth is working unceasingly to ensure that those changes happen, and we will keep you posted as the debate continues to progress.

 

We are confident that these shortcomings will be addressed as the Senate continues to work on its iteration of the tax reform bill.  In fact, the Senate bill is already an improvement on the House bill in several ways.  For example, the Senate legislation includes a provision to repeal Obamacare’s individual mandate.

 

Earlier this week, Club for Growth President David McIntosh coauthored an op-ed praising the Senate for including repeal of the individual mandate in its tax legislation.  As the opinion piece explained, “Given the Senate’s rules and unnecessary, self-imposed budget constraints, most improvements would require congressional tax writers to find ‘savings,’ i.e., tax increases, elsewhere in the tax code. As we have seen, those trade-offs can be painful in a town filled with corporate welfare, cronyism and self-entitlement. That is why eliminating Obamacare’s individual mandate tax penalty is such a politically advantageous option available.”

 

The op-ed in Real Clear Politics went on to explain additional reasons why it is advantageous for the Senate to include a repeal of the individual mandate. “First, recent polling suggests a plurality — roughly 45 percent of voters — support the Republicans’ tax reform efforts.  According to a 2017 YouGov poll, nearly two-thirds of Americans want the individual mandate repealed. That number jumps to 81 percent when looking just at Trump voters. In other words, including repeal will increase the popularity of the tax package.  Second, eliminating the individual mandate penalty will alter the CBO’s health insurance coverage calculation when Republicans return to repeal-and-replace next year.  Remember, the CBO routinely estimated that 15+ million people would “lose” insurance coverage because the bill eliminated the individual mandate, handing the media and the left a powerful talking point against any future reform.”

 

While the Senate bill has many strengths, more can be done to strengthen it.  For example, Senator Ron Johnson (R-WI) this week indicated he cannot support the legislation in its current form.  As The Wall Street Journal reported, Senator Johnson has concerns about the treatment of pass-throughs and family-owned businesses.  Senator Johnson’s hesitations are warranted, and Club for Growth also wants to make certain that tax reform includes the best treatment of pass-through businesses.  In order to achieve the most pro-growth policies and unleash the greatest amount of economic growth, it is imperative Congress do as much as possible to lessen the burdens family-owned businesses and corporations face.  We are confident that Senator Johnson’s concerns will be worked out and that the Senate will deliver on a pro-growth tax reform bill.