Federal tax reform looks like it will be the first major piece of Republican legislation to clear Congress, and that could be good news for middle-class Hall County and its neighbors.
As the fog lifts from around the Senate version of tax reform that passed almost entirely on party lines at 2 a.m. Saturday, it’s becoming more clear that a majority of Americans will receive a net tax cut under the bill, according to reporting from Associated Press and other national media.
Senate leadership tweaked their proposal to win the votes of holdouts like Sens. Ron Johnson and John McCain even in the hours leading up to the final vote on the bill.
“We have the votes,” Senate Majority Leader Mitch McConnell, R-Kentucky, said on Friday after significant internal debate within the GOP over corporate tax cuts, local tax deductions and the federal deficit.
U.S. Rep. Doug Collins, R-Gainesville, and Georgia Sens. Johnny Isakson and David Perdue, both Republicans, have been consistent supporters of the GOP’s tax reform efforts in both chambers.
Carl Cavalli, a political science professor at University of North Georgia’s Dahlonega campus, said the GOP’s attempt to combine two long-held goals of the party, tax relief and deficit reduction, has dragged out the negotiations in the Senate.
“They’re trying to reconcile both of those things in this bill, and it’s proving to be an exceedingly complex dance to try to have significant tax cuts without raising the deficit,” Cavalli said Thursday. “It’s bordering on amazing to watch them try to balance this.”
The result of all of this horse trading is a 10-year bill with front-loaded tax cuts that apply to most Americans and, especially, corporations. While individual tax cuts are phased out after 10 years, the bill’s corporate tax cuts are permanent.
A tool from the New York Times breaks down how the bill affects different income earners. Hall County’s average annual income is about $50,000, and estimates show 81 percent of people earning $50,000-$70,000 will get a tax break of more than $500.
The Senate legislation does away with many deductions — including moving expenses, student loan interest and even a tax break for biking to work — in favor of broad-based tax cuts. The standard deduction used by most Americans would almost double for individuals to $12,000 and $24,000 for couples. The child tax credit per-child also would grow.
Brien Pierce, a certified public accountant and partner at Walker Pierce & Tuck on Bradford Street in Gainesville, said he’s optimistic about what he knows about the bill and its effects on individual taxpayers, businesses and the economy.
“I think it’s going to be very positive,” Pierce said of the general tax reform effort.
He also noted the House version, which was approved in November, repeals the alternative minimum tax, a tax that ensures all income earners regardless of exemptions and deductions pay some level of tax.
That repeal in the House bill was little discussed at the time, but Pierce said he thinks it will “really help a lot of middle-income people that are hit with that each year and some of the higher-income people, too.”
Low-income earners are unlikely to pay the alternative-minimum tax.
However, the alternative minimum tax survived in the Senate version of the bill, raising questions of whether it will make it into the final version to be signed by President Donald Trump.
In the Senate version, specifics have been more of a problem, even the day leading up to a vote on the bill.
Pierce said he wasn’t sure what the final Senate version will look like, and even then the bill has to go to a conference committee to reconcile differences between the Senate and House versions.
“Of course, corporate tax rates look like a consensus that those will be cut and that’ll be good for business owners,” he said, “but that’s all we can say with any certainty right now.”
That rush for tax cuts has pushed serious deficit reduction out of the bill, which as cost at least one Republican vote.
Sen. Bob Corker, R-Tennessee, announced Friday he couldn’t support the bill, saying it didn’t do enough to reduce the deficit. The Congressional Budget Office estimates the bill would increase the deficit by $1.44 trillion over the next 10 years. He voted against the bill on the floor.
However, Republican leaders from Trump to House Speaker Paul Ryan to former presidential candidate Sen. Marco Rubio have said they plan to turn to spending reductions after tax reform, which would tax cuts’ effect on the deficit.
Rubio told Politico in an interview that Republicans would have to address entitlement spending on welfare programs, Social Security, and Medicare and Medicaid once tax reform is finished.
Since Trump’s election, the economy, and especially the record-high stock market, has been heating up — in part because investors have been betting on a tax reform bill.
Should a tax bill pass and the economy continue to grow at rates above 3 percent, Cavalli said it becomes less likely Democrats can take back the House in 2018.
“I really think it’s going to be close,” Cavalli said. “I think as long as the economy keeps humming along, I think Republicans don’t have anything to fear. If it starts to sputter, Democrats will be able to make it a big issue.”
Associated Press reports contributed to this story.