In a move all at once delightful and unsurprising, the GOP, specifically Senate Majority Leader Mitch McConnell, have made a blunder in the new tax bill that could cost their donors millions. It has come to light that McConnell and his cohorts have left one massive oversight in the law that could prove devastating to the corporations to which it applies.
SO WHAT HAPPENED?
Most everyone knows by now that the GOP has pushed a tax bill through the Senate that seemingly no one had even read before Friday. There were no meetings, no talks across the aisle, nothing. Only a forced vote in the wee hours of Saturday morning simply because they run the show right now and they could.
Last Thursday, the day before the bill hit the Senate floor, the GOP nullified all of their corporate donor’s favorite deductions but intended to revisit them before the final version came up for a vote.
Meanwhile, there is an obscure law on the books that state that tax cuts can only add $1.5 trillion to the deficit over the next decade. As of last Thursday, the Senate bill had already cost about that much.
But McConnell was under the gun because there were a few Republican holdouts to nail the vote; like Senator Ron Johnson from Wisconsin who wanted a 23 percent business income deduction for his family-owned business. So to appease them, McConnell did what he had to do to find the money to get their votes.
SHOW ME THE MONEY
Here’s how it worked: Corporations are currently charged 35 percent on their income. At present, they can use something called alternative minimum tax (AMT) by using various deductions and tax credits, which brings them down to a figure much less than 35 percent. How far below that 35 percent was set by the AMT, and it used to be 20 percent. Well, 20 percent of the money the corporations weren’t able to get hidden offshore, to be exact.
The GOP had planned to cut the AMT entirely. However, on Friday as the clock was ticking the GOP stuck that sucker back in there and then forgot about it. Which, hilariously, means that although the corporate tax rate got dropped to 20 percent, the AMT stayed at 20 percent as well.
Which means they effectively blocked corporations from being able to use any deductions at all.
For example, Murray Energy Corporation our of Ohio said that this bill would end up adding $60 million to their tax bill every year.
Bill Murray, the CEO of Murray Energy said, “What the Senate did, in their befuddled mess, is drove me out of business and then bragged about the fact that they got some tax reform passed.” He went on, “This is not job creation. This is not stimulating income. This is driving a whole sector of our community into nonexistence.”
The fallout from this could play out in a couple of different ways.
First, the Senate will undoubtedly have to vote on this legislation again. Before this, it looked as though Ryan had all the votes needed to pass the bill in the House, but that may no longer be the case. They could still rubber stamp it, however, and send it on its merry way to the President’s desk.
Secondly, McConnell is going to need to find some way to replace that revenue, and that is not good news for anyone besides the 1 percent. Republicans COULD lower the AMT to less than 20 percent, but that would add well over $1.5 trillion to the deficit. More likely, they will tax students at a higher rate, kick more people off their insurance, or simply raise the corporate tax rate to 22 percent to make up the difference.
One thing is certain, this is most definitely only the beginning of the unintended consequences of this bill. It sure is nice to see the 1 percent so angry, even if it has no chance of making it into the final cut.
Feature Image via YouTube