Congress Sends Tax Bill to the White House
The Republican-controlled U.S. House of Representatives gave final approval on Wednesday to the biggest overhaul of the U.S. tax code in 30 years, sending a sweeping $1.5 trillion bill to President Donald Trump for his signature.
In sealing Trump’s first major legislative victory, Republicans steamrolled opposition from Democrats to pass a bill that slashes taxes for corporations and the wealthy while giving mixed, temporary tax relief to middle-class Americans.
The House approved the measure, 224-201, passing it for the second time in two days after a procedural foul-up forced another vote on Wednesday. The Senate had passed it 51-48 in the early hours of Wednesday.
Trump had emphasized a tax cut for middle-class Americans during his 2016 campaign. At the beginning of a Cabinet meeting on Wednesday, he said lowering the corporate tax rate from 35 percent to 21 percent was “probably the biggest factor in this plan.”
Trump planned a tax-related celebration with U.S. lawmakers at the White House in the afternoon but will not sign the legislation immediately. The timing of the signing was still up in the air.
After Trump repeatedly urged Republicans to get it to him to sign before the end of the year, White House economic adviser Gary Cohn said the timing of signing the bill depends on whether automatic spending cuts triggered by the legislation could be waived. If so, the president will sign it before the end of the year, he said.
The debt-financed legislation cuts the U.S. corporate income tax rate to 21 percent, gives other business owners a new 20 percent deduction on business income and reshapes how the government taxes multinational corporations along the lines the country’s largest businesses have recommended for years.
Millions of Americans would stop itemizing deductions under the bill, putting tax breaks that incentivize home ownership and charitable donations out of their reach, but also making tax returns somewhat simpler and shorter.
The bill keeps the present number of tax brackets but adjusts many of the rates and income levels for each one. The top tax rate for high earners is reduced. The estate tax on inheritances is changed so far fewer people will pay.
Once signed, taxpayers likely would see the first changes to their paycheck tax withholdings in February. Most households will not see the full effect of the tax plan on their income until they file their 2018 taxes in early 2019.
In two provisions added to secure needed Republican votes, the legislation also allows oil drilling in Alaska’s Arctic National Wildlife Refuge and repeals the key portion of the Obamacare health system that fined people who did not have healthcare insurance.
“We have essentially repealed Obamacare and we’ll come up with something that will be much better,” Trump said on Wednesday.
“Pillaging”
Democrats have called the tax legislation a giveaway to the wealthy that will widen the income gap between rich and poor, while adding $1.5 trillion over the next decade to the $20 trillion national debt, which Trump promised in 2016 he would eliminate as president.
“Today the Republicans take their victory lap for successfully pillaging the American middle class to benefit the powerful and the privileged,” said House Democratic leader Nancy Pelosi.
few Republicans, whose party was once defined by its fiscal hawkishness, have protested the deficit-spending encompassed in the bill. But most of them have voted for it anyway, saying it would help businesses and individuals, while boosting an already expanding economy they see as not growing fast enough.
“We’ve had two quarters in a row of 3 percent growth,” Senate Republican leader Mitch McConnell said after the Senate vote. “The stock market is up. Optimism is high. Coupled with this tax reform, America is ready to start performing as it should have for a number of years.”
Despite Trump administration promises that the tax overhaul would focus on the middle class and not cut taxes for the rich, the nonpartisan Tax Policy Center, a think tank in Washington, estimated middle-income households would see an average tax cut of $900 next year under the bill, while the wealthiest 1 percent of Americans would see an average cut of $51,000.
The House was forced to vote again after the Senate parliamentarian ruled three minor provisions violated arcane Senate rules. To proceed, the Senate deleted the three provisions and then approved the bill.
Because the House and Senate must approve the same legislation before Trump can sign it into law, the Senate’s late Tuesday vote sent the bill back to the House.
Democrats complained the bill was a product of a hurried, often secretive process that ignored them and much of the Republican rank-and-file. No public hearings were held and numerous narrow amendments favored by lobbyists were added late in the process, tilting the package more toward businesses and the wealthy.
U.S. House Speaker Paul Ryan defended the bill in television interviews on Wednesday morning, saying support would grow for after it passes and Americans felt relief.
“I think minds are going to change,” Ryan said on ABC’s “Good Morning America” program.
Reporting by David Morgan and Amanda Becker; Additional reporting by Richard Cowan, Roberta Rampton, Gina Chon and Susan Heavey; Editing by Jeffrey Benkoe and Bill Trott.
Chart of the Day: High Deductible Blues
The higher the deductible in your health insurance plan, the less happy you probably are with it. That’s according to a new report on employer-sponsored health insurance from the Kaiser Family Foundation and the Los Angeles Times.
Chart of the Day: Tax Cuts and the Missing Capex Boom
Despite the Republican tax overhaul, businesses aren’t significantly increasing their capital expenditures. “The federal government will have to borrow an added $1 trillion through 2027 to pay for the corporate tax breaks,” says Bloomberg’s Mark Whitehouse. “So far, it’s hard to see what the country is getting in return.”
Chart of the Day: 2019’s Lobbying Leaders
Roll Call reports that trade, infrastructure and health care issues including prescription drug prices “dominated the lobbying agendas of some of the biggest spenders on K Street early this year.” Here’s Roll Call’s look at the top lobbying spenders so far this year:
Can You Fix Social Security? A New Tool Lets You Try
The Congressional Budget Office released an interactive tool Wednesday that shows how some widely discussed policy changes would affect the long-run financial health of the Social Security system.
“This interactive tool allows the user to explore seven policy options that could be used to improve the Social Security program’s finances and delay the trust funds’ exhaustion,” CBO said. “Four options would reduce benefits, and three options would increase payroll taxes. The tool allows for any combination of those options. It also lets the user change implementation dates and choose whether to show scheduled or payable benefits. … The tool also shows the impact of the options on different groups of people.”
Click here to view the interactive tool on the CBO website.
Why Prescription Drug Prices Keep Rising – and 3 Ways to Bring Them Down
Prescription drug prices have been rising at a blistering rate over the last few decades. Between 1980 and 2016, overall spending on prescription drugs rose from about $12 billion to roughly $330 billion, while its share of total health care spending doubled, from 5% to 10%.
Although lawmakers have shown renewed interest in addressing the problem, with pharmaceutical CEOs testifying before the Senate Finance Committee in February and pharmacy benefit managers (PBMS) scheduled to do so this week, no comprehensive plan to halt the relentless increase in prices has been proposed, let alone agreed upon.
Robin Feldman, a professor at the University of California Hastings College of Law, takes a look at the drug pricing system in a new book, “Drugs, Money and Secret Handshakes: The Unstoppable Growth of Prescription Drug Prices.” In a recent conversation with Bloomberg’s Joe Nocera, Feldman said that one of the key drivers of rising prices is the ongoing effort of pharmaceutical companies to maintain control of the market.
Fearing competition from lower-cost generics, drugmakers began over the last 10 or 15 years to focus on innovations “outside of the lab,” Feldman said. These innovations include paying PBMs to reduce competition from generics; creating complex systems of rebates to PBMs, hospitals and doctors to maintain high prices; and gaming the patent system to extend monopoly pricing power.
Feldman’s research on the dynamics of the drug market led her to formulate three general solutions for the problem of ever-rising prices:
1) Transparency: The current system thrives on secret deals between drug companies and middlemen. Transparency “lets competitors figure out how to compete and it lets regulators see where the bad behaviors occur,” Feldman says.
2) Patent limitations: Drugmakers have become experts at extending patents on existing drugs, often by making minor modifications in formulation, dosage or delivery. Feldman says that 78% of drugs getting new patents are actually old drugs gaining another round of protection, and thus another round of production and pricing exclusivity. A “one-and-done” patent system would eliminate this increasingly common strategy.
3) Simplification: Feldman says that “complexity breeds opportunity,” and warns that the U.S. “drug price system is so complex that the gaming opportunities are endless.” While “ruthless simplification” of regulatory rules and approval systems could help eliminate some of those opportunities, Feldman says that the U.S. doesn’t seem to be moving in this direction.
Read the full interview at Bloomberg News.