Current GOP Tax Plan

[Belsnickel]

So, I figured one thread for any news about the tax plan currently winding its way through Congress would be a good thing. I'm sure there will be lots of things coming out about it.

One thing I saw today was the negative impact it will potentially have on municipal infrastructure improvements.

http://www.governing.com/topics/finance/gov-gop-republican-congress-trump-tax-reform-muni-market.html

Quote:In a surprise move, the Republican tax plan released on Thursday contains a proposal that finance experts say would be devastating for governments trying to find money for economic development projects.

The bill would eliminate all private activity bonds, which allow tax-exempt municipal bonds to be issued on behalf of a government for a project built and paid for by a private developer. Tax-exempt bonds fetch lower interest rates in the municipal market and therefore lower the overall cost of financing. The projects financed with this type of debt are typically things in the public interest, such as low-income housing, hospitals or airports.

The proposal caught the infrastructure finance community completely off-guard.

“It’s been a big surprise to the entire public finance community,” says Will Milford, a tax attorney at the firm Bryant Miller Olive. “For months, we’ve been hearing that munis were safe.”

Milford added that targeting private activity bonds is especially confusing because those types of bonds are the “logical way” to stimulate private investment in infrastructure -- a hallmark of President Trump’s campaign. In fact, during his confirmation hearing, Treasury Secretary Steve Mnuchin suggested that private activity bonds could be expanded.

“It goes against everything we were hearing would be a focus,” Milford says.

The federal government, though, would benefit from eliminating private activity bonds because it currently loses out on collecting tax revenue from the interest they earn for investors.

Many state and local government stakeholders are warning of dire consequences.

Oregon Treasurer Tobias Read said in a statement that the proposal would functionally eliminate the Oregon Facilities Authority. Over the past 27 years, $9 out of every $10 the authority has helped finance has gone toward either a health care or educational facility, according to the treasurer's office.

“All of these projects would need to be done with taxable, higher-interest-rate financing, which makes it far less likely for them to pencil out,” says Laura Lockwood-McCall, the debt division director at the Oregon State Treasury.

The Council of Development Finance Agencies (CDFA) president, Toby Rittner, called the move “devastating” and said in a letter that eliminating private activity bonds “is bad policy [that] will cripple economic, infrastructure and community development.”

The bonds have received criticism in the past, and a 2013 New York Times article called them a “stealth subsidy for private businesses” because they were used for things like a golf course and office buildings.

But government stakeholders argue they overwhelmingly help finance needed projects. New York City’s housing department, for example, tweeted on Friday that the state’s tax-exempt housing bonds helped finance affordable housing for nearly 170,000 people over four years.

The tax bill doesn’t stop at eliminating private activity bonds. It would also nix other types of bonds valued by state and local governments.

Among the most concerning to local leaders, it would ban governments from issuing what are called advanced refunding bonds. These bonds allow governments to refinance debt earlier than they would have otherwise, ultimately letting governments take advantage of lower interest rates years sooner. The bill also bans issuing tax-exempt bonds for sports stadiums, a proposal that had already been floated this year on Capitol Hill.

It’s unclear exactly how much of the municipal market would be affected by the change, but experts say it would be a significant portion. According to Municipal Market Analytics’ Matt Fabian, up to 20 percent of the $3.7 trillion municipal market is made up of private activity bonds. Making those bonds taxable would dampen future issuance.

When it comes to the advanced refunding bonds, Fabian says between 10 and 20 percent of all annual bond refinancings fall under that category. That means up to one-tenth of the total $386 billion in average annual bond issuance could be attributed to that type of bond.

The notion of eliminating the tax-free status of all municipal bonds has been a perennial topic in Congress for years. But when the Republican framework for tax reform preserved that status, municipal bond market users thought they had emerged unscathed.

Now, stakeholders are left scratching their heads.

The lobbyist for the Government Finance Officers Association told the Bond Buyer that the proposal never surfaced in more than 90 meetings on the Hill. Meanwhile, the CDFA worked for weeks with Democrats in Congress to introduce a new type of disaster recovery bond to aid residents and municipalities in rebuilding. That bill, also introduced this week, would be rendered obsolete under the latest tax plan.

This is a bit baffling, because if we want to encourage private investment in infrastructure, and we want this to be more in the hands of state and local governments (typically the GOP view), then this puts a giant roadblock in their way.

[*michaelsean*]

About time we tax those rich people for the free ride they've been getting on that interest.

actually I'm sure there is an upside and a downside, and I really don't know which is better, and more importantly I don't care anymore.

[Belsnickel]

(11-06-2017, 12:04 PM)michaelsean Wrote: About time we tax those rich people for the free ride they've been getting on that interest.

actually I'm sure there is an upside and a downside, and I really don't know which is better, and more importantly I don't care anymore.

Political fatigue setting in?

[GMDino]

Is this the plan they put on last thursday or the modified one they posted late Friday?

http://www.chicagotribune.com/news/nationworld/politics/ct-trump-gop-tax-bill-obamacare-20171103-story.html

Quote:House Republicans grappled Friday with the difficulty of turning their new tax plan into law, making a change that would make the proposal's tax cuts for individuals less generous and entertaining a controversial proposal from President Donald Trump to use the tax bill to repeal a central element of the Affordable Care Act.



Republicans changed the tax overhaul, which was announced Thursday, to cut $81 billion from the tax breaks it would provide to individual taxpayers. The move was made as lawmakers realized their initial effort would run up against the $1.5 trillion in total borrowing over a decade that Congress had authorized to finance the tax cut plan.


Party leaders also took a preliminary step to study Trump's proposal to include language in the tax bill that would scrap the Affordable Care Act's individual mandate, a change nonpartisan analysts say would save the government more than $400 billion over a decade but would also leave 15 million more Americans without health insurance.



Republicans released their proposed overhaul of the personal and corporate tax code on Thursday after months of negotiations, but Friday's last-minute changes showed how challenging it would be to finalize the law by year's end.

The decision to reduce benefits for individual taxpayers threatens to reinforce perceptions the bill is tilted toward helping the wealthy and corporation at the expense of middle-class Americans.


Republicans plan to save the $81 billion over a decade by changing the way the bill measures inflation, a shift that would move taxpayers into higher-tax brackets more quickly and probably hit middle-class taxpayers harder than the very wealthy.

Undermining the Affordable Care Act through a tax overhaul, meanwhile, would probably draw the same type of opposition that earlier efforts did in the Senate, dooming several such attempts to repeal what some call Obamacare earlier this year. Many in Congress say such an effort would destroy Republicans' chance of passing major legislation this year.

[Benton]

(11-06-2017, 11:59 AM)Belsnickel Wrote: So, I figured one thread for any news about the tax plan currently winding its way through Congress would be a good thing. I'm sure there will be lots of things coming out about it.

One thing I saw today was the negative impact it will potentially have on municipal infrastructure improvements.

http://www.governing.com/topics/finance/gov-gop-republican-congress-trump-tax-reform-muni-market.html


This is a bit baffling, because if we want to encourage private investment in infrastructure, and we want this to be more in the hands of state and local governments (typically the GOP view), then this puts a giant roadblock in their way.

Wow. I would be shocked if that makes it through, though. It would pretty much end municipal building projects for most small to medium communities, at least in the short-term. I have no idea how it would impact larger areas. But this would force taxing districts to either levy huge taxes to pay for immediate projects, pay more for projects in the form of interest, or save up for a long period of time to pay for them. The last option would likely be out for some districts (like school boards in Kentucky, who can only go up a max of four percent) who can barely keep up with costs as it is.

[Belsnickel]

(11-06-2017, 12:13 PM)GMDino Wrote: Is this the plan they put on last thursday or the modified one they posted late Friday?

Whatever the current iteration is, this is going to change a lot, I am sure.

[Belsnickel]

(11-06-2017, 12:16 PM)Benton Wrote: Wow. I would be shocked if that makes it through, though. It would pretty much end municipal building projects for most small to medium communities, at least in the short-term. I have no idea how it would impact larger areas. But this would force taxing districts to either levy huge taxes to pay for immediate projects, pay more for projects in the form of interest, or save up for a long period of time to pay for them. The last option would likely be out for some districts (like school boards in Kentucky, who can only go up a max of four percent) who can barely keep up with costs as it is.

I'm surprised it made it in at all. It seems to be very counter-intuitive from a conservative standpoint.

[CKwi88]

(11-06-2017, 12:20 PM)Belsnickel Wrote: I'm surprised it made it in at all. It seems to be very counter-intuitive from a conservative standpoint.

I feel like this sums up the GOP's last two years.

[*michaelsean*]

(11-06-2017, 12:12 PM)Belsnickel Wrote: Political fatigue setting in?

Going on a couple years.  I enjoy kicking it around here, but that's about the extent.

[Belsnickel]

(11-06-2017, 12:46 PM)michaelsean Wrote: Going on a couple years.  I enjoy kicking it around here, but that's about the extent.

I get it. I have a higher tolerance because policy is what I am into and I'd have to in order to deal with it. My wife, though, she can't handle it like I can. She gets fired up, but the constant barrage of it for the past few years has taken its toll. Us being in Virginia doesn't help since every year is an election year for us.

[JustWinBaby]

(11-06-2017, 12:20 PM)Belsnickel Wrote: I'm surprised it made it in at all. It seems to be very counter-intuitive from a conservative standpoint.

The corporate tax cut is a good thing, then it's mainly a question of how you pay for it.

That cut in corporate rates accrues to the equity holders, so to me what should be done is raising the cap gains rate on higher income individuals.  That's not what they are doing, instead eliminating a hodge-podge of largely unrelated deductions to get there.

Overall, it appears to be a very complicated way to give a cut to a pretty narrowly targeted group (primarily small-business owners earning over $250k).

[Belsnickel]

(11-06-2017, 03:32 PM)JustWinBaby Wrote: The corporate tax cut is a good thing, then it's mainly a question of how you pay for it.

That cut in corporate rates accrues to the equity holders, so to me what should be done is raising the cap gains rate on higher income individuals.  That's not what they are doing, instead eliminating a hodge-podge of largely unrelated deductions to get there.

Overall, it appears to be a very complicated way to give a cut to a pretty narrowly targeted group (primarily small-business owners earning over $250k).

Yeah, it's a very convoluted plan. Didn't I read the NFIB even came out against it because of some of the things you're point out? I'd be interested to see what the Chamber of Commerce has to say, haven't looked it up, but I know they rep large and small alike, so it's a tough spot for them.

[JustWinBaby]

(11-06-2017, 04:53 PM)Belsnickel Wrote: Yeah, it's a very convoluted plan. Didn't I read the NFIB even came out against it because of some of the things you're point out? I'd be interested to see what the Chamber of Commerce has to say, haven't looked it up, but I know they rep large and small alike, so it's a tough spot for them.

I haven't really read much analysis on it.  It's pretty punitive to higher taxed states, so I wonder if it can even get thru the House when Republicans from CA, NY, etc can't possibly vote for it.

Although the elimination of state tax deduction is interesting.  Since we're always told how deductions are welfare, then higher tax states are being subsidized by lower ones. 

By my rough calculation, the muni bond deduction would raise costs of financing about 25%.  Of course, financing is a lousy way to do these projects....too bad nobody is fiscally responsible enough to run budget surpluses that accrue for infrastructure projects - frickin' politicians just can't keep their hands off a surplus.

[Belsnickel]

(11-06-2017, 05:18 PM)JustWinBaby Wrote: By my rough calculation, the muni bond deduction would raise costs of financing about 25%.  Of course, financing is a lousy way to do these projects....too bad nobody is fiscally responsible enough to run budget surpluses that accrue for infrastructure projects - frickin' politicians just can't keep their hands off a surplus.

No argument from me, here. Virginia is horrible for this.

[JustWinBaby]

(11-06-2017, 05:28 PM)Belsnickel Wrote: Virginia is horrible for this.

They're all bad.  And one wonders where all that gasoline tax for roads & bridges actually goes...

[*michaelsean*]

(11-06-2017, 07:26 PM)JustWinBaby Wrote: They're all bad.  And one wonders where all that gasoline tax for roads & bridges actually goes...

Good question. We have a bridge here that is known as one of the most needed replacements in the country, but nobody can figure out how to pay for it.

[Belsnickel]

In my area, the proposed bill has the opportunity to really damage higher education across the country: http://www.chronicle.com/article/Republican-Tax-Proposal-Gets/241662

tl;dr: The proposal eliminates a lot of credits and programs that will make college less affordable and will reduce investment revenue and charitable receipts.

On a personal note, this also results in me having to stop my education if this passes as is. Eliminating the tax exemption under IRC section 117 (d) means that my tuition waivers become taxable income, which isn't something I would be able to afford since I work for a state that does a shitty job compensating its employees.

[GMDino]

https://www.nytimes.com/2017/11/14/us/politics/tax-plan-senate-obamacare-individual-mandate-trump.html?smid=tw-nytimes&smtyp=cur

Quote:Senate Republicans have decided to include the repeal of the Affordable Care Act’s requirement that most people have health insurance into the sprawling tax rewrite, merging the fight over health care with the high-stakes effort to cut taxes.

They also have made a calculated gamble to help speed their bill to passage on a party-line vote: Republicans revealed late Tuesday they would set all of their tax cuts for individuals to expire at the end of 2025, to comply with a procedural requirement.

Their deep cut in the corporate tax rate would remain permanent.


Both the expiration decision and the move to tuck the repeal of the so-called individual mandate into the tax overhaul are attempts by Republicans to solve two problems: math and politics. Repealing the mandate, a longstanding Republican goal, would save hundreds of billions of dollars over the next decade. That would free up money that is earmarked to expand middle-class tax cuts.


Setting individual provisions to expire helps hold down the overall cost of the bill, which can add no more than $1.5 trillion to the deficit over 10 years and cannot add to deficits after 10 years. Mandate repeal could also help secure the votes of the most conservative senators, enabling lawmakers to pass the bill along party lines.


The decision to set individual provisions to expire at the end of 2025 could set up a potential “fiscal cliff” situation then, akin to the one President Barack Obama and Congress faced at the end of 2012. Those breaks include tax-rate reductions, the near-doubling of the standard deduction and a provision to reduce the number of Americans who would have to pay the estate tax. Republicans made those changes to stay within Senate rules that allow them to pass the bill on a party-line vote; as promised, they did not set expiration dates on the bill’s corporate rate cut.





If the bill were to become law, and Congress did not seek to make those provisions permanent, tax bills would rise for vast parts of the country in 2026.


The mandate repeal would save more than $300 billion over a decade but result in 13 million fewer Americans being covered by health insurance by the end of that period, according to the Congressional Budget Office. Republicans said on Tuesday that they would use the savings — which stem from reduced government spending to subsidize health coverage — to pay for an expansion of the middle-class tax cuts that lawmakers had proposed.
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Middle-class measures in the revised tax plan released late Tuesday include expanding the child tax credit to $2,000 a child, up from $1,650 in the original version of the Senate plan, and three reductions in marginal tax rates. One rate would fall to 22 percent from 22.5 percent; another to 24 percent from 25 percent; and another to 32 percent from 32.5 percent.


On the House side, members of the Rules Committee met Tuesday evening, one day earlier than scheduled, to pave the way for a floor vote on Thursday.


Democrats said the mandate repeal would underwrite tax cuts for the rich at the expense of people who buy insurance on the individual market.


“The people this is going to hit are middle-class people that ostensibly this whole bill was supposed to be about helping,” said Senator Claire McCaskill, Democrat of Missouri and a member of the Finance Committee.


Average health insurance premiums in the individual market would increase by about 10 percent, but insurance markets would remain stable in almost all parts of the country, the budget office found.


President Trump has urged his fellow Republicans to repeal the mandate in their tax bill, and in recent days, the idea has gained steam in the Senate Republican conference as lawmakers try to come up with a plan that can receive at least 50 votes.


“We’re optimistic that inserting the individual mandate repeal would be helpful,” said Senator Mitch McConnell, Republican of Kentucky and the majority leader.

But the move risks reviving [url=https://www.nytimes.com/news-event/ahca-american-health-care-act-repeal-obamacare]the contentious debate over health care that Republicans found themselves mired in for much of the year. 
Previous efforts to dismantle the Affordable Care Act have failed, leaving Republicans with little legislative success to show for their congressional majority.


“This is turning a tax bill into a health care bill, with our colleagues getting an hour’s worth of notice,” said Senator Ron Wyden of Oregon, the top Democrat on the Finance Committee.


In a letter on Tuesday, groups representing doctors, hospitals and insurers urged congressional leaders to keep the individual mandate in place. The groups, which included the American Medical Association and America’s Health Insurance Plans, wrote that “eliminating the individual mandate by itself likely will result in a significant increase in premiums, which would in turn substantially increase the number of uninsured Americans.”


On Tuesday, Republicans were laser-focused on speeding ahead with the tax rewrite and showed no desire to slow down that effort.
House Republican leaders plan to hold a vote on their bill on Thursday and expressed confidence that it would pass the House. Senate Republicans, who unveiled their tax proposal last week, are planning to vote on their own version the week after Thanksgiving.


On Tuesday, Goldman Sachs analysts raised their odds of a tax package being signed into law to 80 percent, from 65 percent.


“We feel very good where we are,” said Paul D. Ryan, the House speaker and Republican of Wisconsin.


Senator John Thune of South Dakota, a member of the Republican leadership who also serves on the Finance Committee, said he was confident that the tax plan, with the mandate repeal as part of it, could pass the Senate.



But not all senators were as sanguine about its passage and Republicans will need to carefully calibrate votes, given that they hold a narrow 52-seat majority in the Senate.


“I personally think that it complicates tax reform,” said Senator Susan Collins, Republican of Maine.


In tandem with repealing the individual mandate as part of the tax bill, Mr. Thune said that Republicans were committed to advancing a bipartisan measure to stabilize health insurance markets developed by Senators Lamar Alexander, Republican of Tennessee, and Patty Murray, Democrat of Washington. That measure, whose fate has been uncertain, would include two years of funding for subsidies to insurers — known as cost-sharing reduction payments — that Mr. Trump decided to cut off last month.


But Ms. Murray rejected any suggestion that the mandate repeal could be paired with her legislation.


“That is the exact opposite of what we should be doing,” she said. “Americans have stood up and spoken loudly for the last year saying they do not want the markets destabilized, and their provision in the tax bill that they are talking about will really destabilize the marketplaces.”


Mr. Trump had urged lawmakers to end the individual mandate, including in a Twitter post on Monday. Several conservative senators, like Tom Cotton, Republican of Arkansas, and Rand Paul, Republican of Kentucky, had also called for its repeal as part of the tax overhaul.

Lobbyists seeking changes to the bill were mostly preparing to shift their efforts to the Senate.


The National Association of Realtors flew in 60 of its members from around the country to raise concerns with House members over several provisions in the House bill that the group says will hurt home buyers and erode incentives for homeownership.


The mood they found in their meetings, said Jamie Gregory, the group’s deputy chief lobbyist, was “resignation that this bill is going to pass the House.” But, he added: “There’s a long way to go. There’s still the Senate, there’s still a conference committee, there’s still a chance to make this better.”

[Au165]

Trying to back into a healthcare win is going to bring down the whole thing. It is a greed issue, can't be happy with one win but instead want to try and go for two and may end up with none.

[*Nately120*]

(11-15-2017, 12:44 PM)Au165 Wrote: Trying to back into a healthcare win is going to bring down the whole thing. It is a greed issue, can't be happy with one win but instead want to try and go for two and may end up with none.

Well the only TV station I've been permitted to trust assures me that Obamacare is a disaster, so I say bring it.