Senate Dem Finance staffers blast GOP tax plan

Staff members for Senate Finance Committee Democrats are raising a number of concerns with the House Republicans’ tax-reform plan and claiming it is “unfair to the poor and middle class.”

The staff members’ concerns, outlined in a memo to other Democratic tax staffers earlier this month, come as the House Ways and Means Committee is preparing legislation based off their blueprint. Congressional Republicans and President-elect Donald Trump have made tax reform a top priority.

The blueprint, released in June, would lower the top individual tax rate to 33 percent and the corporate tax rate to 20 percent.

{mosads}

One of the issues that the Finance Committee Democratic staff has with the blueprint is that they believe it is regressive, since most of the tax cuts under the plan would go to the top 1 percent of taxpayers.

“Regressivity would be exacerbated if Republicans intend to (eventually) offset the cost of the Blueprint through cuts to transfer payments,” the staff said in the memo.

The Democratic staff also argued that the House Republicans’ plan expands tax breaks for the wealthy and curbs tax preferences that benefit lower- and middle-income households. They were critical of the fact that the blueprint eliminates the estate tax and lowers tax rates on capital gains.

On the business side, the staff had concerns about a provision in the blueprint that would impose new taxes on imports and exempt from the corporate tax goods that are made in the U.S. and exported.

The staff said that this provision, known as “border adjustments,” is likely to violate World Trade Organization rules. As a result, foreign trading partners could successfully challenge the provision, and U.S. exports could be subject to punitive tariffs. The Democratic staff also argued that the provision could lead to higher consumer prices. 

The border adjustments proposal has drawn a considerable amount of backlash lately, including from Koch Industries and retail groups.

The Democratic staff said that the blueprint would increase the deficit and “reflects a belief that tax cuts pay for themselves (or, perhaps, that deficits don’t matter).”

To deal with the deficit issue, Republicans could try to lower the cost of the plan by being more aggressive with ending tax breaks, offset the revenue losses by cutting spending or downplaying the official revenue estimate from the Joint Committee on Taxation and instead focus on other estimates “who might assume, unrealistically, that the tax cuts would magically create 4 percent GDP growth,” the staff said.

The staff members also warned that their concerns about the House GOP blueprint are “amplified” by the fact that legislation based on it is likely to be considered through a process known as budget reconciliation.

Reconciliation would make it easier for Republicans to pass a tax-reform bill, since bills considered through reconciliation cannot be filibustered in the Senate. But bills passed through reconciliation can’t increase the deficit after 10 years.

“The budget reconciliation process leads to legislation that is temporary, non-comprehensive, and illogical,” the staff members said. “We would prefer that tax reform be comprehensive, lasting, and smart.”

Politico first reported on the memo.