The republicans and the tax reform

The Republicans try hard to keep their promise and reform the health care system, but things are not at all as easy as they may seem. As we all know, the Trump administration said it loud and clear that one of its goals was to cut taxes in 2017, and now Republicans in Congress are desperate to show that they have no problem doing it. On July 27th leaders from Congress and the White House announced they had come to an agreement on the main ideas of tax reform. Few days later, the White House set out an tough timetable to pass a bill through the House in October and afterwards, the Senate the following month. Yet Republicans are not at all as united as it would be indicated regarding tax policy.
Though tax “reform” is not the best way of putting it. The last true reform, in 1986, under Ronald Reagan, reduced tax rates without many loses in the revenue by dropping out swathes of tax deductions. Crucially, it was a joined effort of all those involved, which made it easier for Congress to take on the interest groups which fiercely defend the benefits they gain from carve-outs. Though both sides seemed open-minded to negotiating, it’s not sure they will be willing to co-operate. The Democrats consider that wealthy Americans must not see any tax cuts—a demand that clashes with all recent comprehensive conservative
The Republicans alone are unlikely to enlarge the tax base much. The administration has shown little interest to accept some expensive tax breaks like those for mortgage interest and employer-provided health insurance, and, for corporations, an important deduction for the interest. All three are defended by very strong lobbies. Only the deduction for state and local taxes seems firmly decided, which mainly benefits residents of high-tax Democratic states such as California and New York. Those who intend to cut taxes criticize callously the corporate-tax system for favouring particular industries. But the biggest such breaks go to domestic manufacturers and oil and gas producers. As President Donald Trump gets caught in the middle and wouldn’t want either abolished. The problem is that the potential tax base actually shrank, because they ruled out a controversial “border adjustment” to the corporate tax, which would have been applied to imports, but also to exports. This situation makes things even more difficult to handle. In order to do it by themselves, Republicans will need to stick united. The procedure allows tax legislation to pass with just 51 votes, but only once a budget is defined. It is all too clear that politicians must bear in their minds the fact that these changes would come with their own costs, before seeing their effects on the well-being of the average Americans.

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