While the U.S. House and Senate work to synthesize the two versions of the proposed tax plan into one they can attempt to pass by the end of the year, some local people are bracing for impact.
Meanwhile, over 40 independent analysts—including the nonpartisan Tax Policy Center—are coming forward with analyses stating the new tax policy would hurt most Americans.
Small Business Perspective
"Through all the backroom deals, the corporate lobbyists and an attempt to fulfill Republican wish lists in exchange for their vote, this bill now looks like a sweet deal for the wealthy elite," says Jason J. Conner, a Bend computer programmer who works from a home office. Conner worries about the long term—in the way of his deductibles for his small home office and LLC— rather than the short term tax break, which he says, "probably won't amount to much... my guess is a few hundred dollars."
Matthew Schneider, a Portland-based CPA who runs his own firm, agrees with Conner's sentiment.
"Those small business owners who itemize their deductions—contractors, freelancers, the like—especially those who deduct a significant amount from their taxable income, are highly likely to be paying more by 2019." Schneider is on par with other independent analyses—over 40 reported on a federal level— positing that by the end of 2025, any tax breaks promised in the new plan would dissipate due to inflation. "The bill as I read it, adopts a less generous calculation for factoring in inflation," he says, "but corporate tax rates will remain unaffected once in place."
The current incarnation of the bill sees the corporate tax rate slashed from 35 percent to 20 percent, though the final bill may a slight increase to an estimated 22.5 percent. The president is accurate in his assertion that the U.S. has the highest universal corporate tax rate, which when combined with state and local taxes, was at 39 percent in 2016.
For comparison, France was at 34.4 percent, Australia at 30 percent, Canada at 26.7 percent, Israel at 24 percent and Ireland at 12.4 percent, according to 2015 statistics from the Organisation for Economic Co-operation and Development.
Yet, corporations still receive major tax incentives and breaks from their own states, often avoiding those high rates. For example, Nike Inc., is receiving nearly $2 billion in tax reductions over a 30-year time period because of a law signed in 2012 by former Governor John Kitzhaber, who convinced Nike to stay in the state after it threatened to leave. The recently-leaked Paradise Papers alleged that Nike holds more than $12.2 billion in offshore accounts—mostly in tax-haven Bermuda, according to a report from Willamette Week.
The Long and Short
The Source Weekly reached out to seven Central Oregon certified public accountants and the Bend Chamber to weigh in on the new tax plan. All declined to comment or did not return correspondence, citing that they wouldn't comment on policy which was still not finalized.
The 500-page Senate bill, full of amendments scrawled in the margins, was given to senators a mere few hours before the 2 am vote Dec. 2, yielding a 51-49 majority win.
Senator Ron Wyden, D-OR, is the top Democrat on the Senate Finance Committee. He said the Senate bill is a scam meant to prop up larger corporations at the expense of the middle class.
Referring to Secretary of the Treasury Steven Mnuchin's statements that the tax cut would completely pay for itself because the economy would grow faster, Wyden said shortly after the bill's passing: "This administration's top salesmen spent months trying to con the American people into buying false claims about their tax plan... (the) Treasury has broken this promise intentionally and know the truth would sink this same once and for all."
On Dec. 11, the Treasury Department released its analysis of the GOP tax plan, finding that it will not, as Mnunchin stated, "pay for itself." The one-page document concluded that the tax plan would generate approximately $1.8 trillion in extra revenue over a decade. The legislation is thus far estimated to cost $1.4 trillion to implement. The current deficit is $20.6 trillion—something, as Federal Reserve Chair Janet L. Yellen, in her semiannual testimony before Congress recently pointed out, "is the type of thing that should keep people awake at night."
In a statement, Wall Street heavyweight Goldman Sachs noted that America's trillion-dollar debt is already at the highest since just after WWII. "This new tax projection will make it higher," representatives from Goldman Sachs wrote, "...should increase the deficit further, raising it from 3.2 percent GDP to 5.1 percent in 2012."
On Nov. 16, Rep. Greg Walden, R-Hood River, released a statement following the passage of the Tax Cuts and Jobs Act—the U.S. House version of the bill—saying: "This tax reform package will provide much-needed tax relief for individuals, families and small business owners in our district, and make the burdensome process of filing taxes much simpler."
In that statement, Walden cited benefits for Oregon's 2nd Congressional District—which includes Central Oregon—including the increase of the child tax credit from $1,000 per child to $1,600, and a new, lower 9 percent tax rate on the first $75,000 of net business income for active small business owners earning less than $150,000 through the business. Also, with a proposed increase to the standard deduction, allowing more people to avoid itemizing their deductions, Walden's statement alleges that "nine out of 10 Americans will be able to file their taxes on a postcard."
A Poor Fit for Oregon?
"...It's like wearing a tuxedo to the beach," said Wyden, in an interview with KOIN 6 News. "...It's a poor fit for Oregon."Schneider, the CPA, agrees with the analysis, stating that people in Oregon will lose out because of higher local and state taxes, since the Senate bill limits or completely eliminates many deductions. "Since the bill only gives a $10,000 deduction in property taxes, anyone who pays higher levels of state or local income tax will be particularly hard hit."
Though he noted, that the mortgage interest deduction and the charitable giving rate were still preserved. Another silver lining, also pointed out by Walden: "Families with children are going to get bigger tax breaks than singles without," he said.
So how will the White House pay for the plan in the long term? House Speaker Paul Ryan said in an interview with conservative talk radio show host, Ross Kaminsky, that the GOP will tackle reducing spending on federal health care and anti-poverty programs. "We're going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit," Ryan said.
With the House and Senate reconciling their versions of the bills, legislators are promising to have the bill on the president's desk by Christmas.