The tax bill, which was passed in the middle of the night last Friday and rushed to the point that amendments were being handwritten in the margins, is filled with loopholes, “bugs,” and “glitches,” experts say.
Tax lawyers warn that some of the provisions in the bill could be easily “gamed.” A plan to cut taxes on “pass-through” businesses – companies in which owners pay a personal income tax on income from their business – is a key provision that could lead to broad tax avoidance, they say.
On the other hand, Republicans also shot themselves in the foot by not giving corporations as big a tax cut as they intended.
The Senate decided to keep the alternative minimum tax, which ensures corporations with large deductions don’t pay less than 20 percent in taxes, at the last minute. That means that the tax breaks in the bill would be nullified entirely for many businesses the Republicans attempted to boost.
Some provisions are simply too vaguely written, like a proposal to tax investment earnings of wealthy private universities’ endowments. “The legislation doesn’t explain what’s considered an endowment, and some colleges have more than 1,000 accounts,” Politico explains.
“The more you read, the more you go, ‘Holy crap, what’s this?’” Greg Jenner, who worked as a top tax official at the Treasury Department under George W. Bush, told Politico. “We will be dealing with unintended consequences for months to come because the bill is moving too fast.”
House Ways and Means Chairman Rep. Kevin Brady (R-TX), the author of the House Republican tax plan, told Politico that the problems will be ironed out when the two chambers negotiate the final plan to hammer out the differences between the two bills.
“We’ve gotten really good feedback on how best to fine-tune it,” he said. “It’s really showing us where we need to land, and the issues we need to improve in conference.”
Republicans have been quick to compare their tax disaster to the passage of Obamacare, when lawmakers only understood some of the provisions in the bill after it was passed.
But it took Democrats more than six months to pass the Affordable Care Act. By contrast, the House rushed the bill in just two weeks, while the Senate wrapped up their efforts in three weeks.
The haste of the process means many things were missed.
“You can never catch all the implications,” said Jenner. “That problem is magnified exponentially when you’re rushing through like this.”
And while Brady says the problems will be fixed, Congressional Republicans are again rushing the process under pressure from the Trump White House, which wants them to complete the process by December 22.
“We want it to proceed as quickly as possible,” White House legislative director Marc Short told Politico
If they do manage to fix the problems, they will be faced with new ones. Under the “reconciliation” process, an arcane rule that Republicans are using to avoid a Democratic filibuster, they are unable to raise the deficit by more than $1.5 trillion over the next 10 years. Some of the fixes may cause the cost of the bill to go up. If they try to pass it through the Senate under normal rules, Democrats can block any of their legislation.
The GOP did this to avoid scrutiny from the opposition. Now many of the Republicans in Congress, upon seeing what’s actually in the bill they voted for, could become the opposition themselves.