House GOP moves to lock in tax cuts

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Why it matters: House Republicans may pass the package this month, but the legislation has little chance of getting through the Senate, where it would need Democratic votes.

Republican-led panel in the U.S. House of Representatives voted Thursday to make the individual tax cuts from President Donald Trump's 2017 tax overhaul permanent, a move seen by some as a bid to help GOP candidates in the November 6 congressional elections.

And a dozen high-tax states have taken or are considering measures to get around the cap.

But the legislation also carries risks for Republican fiscal conservatives.

Passage in the Senate would require a 60-vote supermajority because the legislation would add to the already burgeoning federal deficit. "The Protecting Family and Small Business Tax Cuts Act locks in the tax relief from the Tax Cuts and Jobs Act - which included a almost doubled standard deduction, a doubled Child Tax Credit, lower rates across the board, and a historic 20-percent pass-through deduction for Main Street businesses".

Residents in states like New York, New Jersey and California could see substantial increases in their federal tax bills next spring because of the deduction cap.

Dubbed "Tax Reform 2.0", the House package is meant to augment President Donald Trump's 2017 tax overhaul, which added $1.5 trillion to the federal deficit by providing permanent tax cuts for US corporations, but only temporary individual tax cuts that are set to expire after 2025.

"Republicans are cutting taxes on the rich for the second time in less than a year", said Rep. Richard Neal of MA, the panel's senior Democrat.

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Democrats say those cuts mainly helped the wealthy and corporations.

The cuts passed in December are projected to add an estimated $1.5 trillion over a decade to the federal deficit, the difference between Washington's spending and the taxes it collects.

"If this were likely to be enacted in the near term, those numbers would be hard to square", said David Noren, a tax partner with the law firm McDermott, Will & Emery.

The bill includes several retirement-related provisions that would allow small businesses to more easily offer 401 (k) plans, as well as new individual savings accounts for education and newborns.

To the dismay of party leaders, the healthy economy and Trump have become countervailing forces. On top of that, the second quarter of 2018 was only the 10th quarter since 2000 in which economic growth topped 4 percent, at 4.1 percent.

House Republican leaders are portraying the second crack at tax cuts as championing the middle class and small businesses. That's four points below his previous 2018 low of 35 per cent approval among political independents in CNN polling, and one point below his previous all-time low among independents in polling reached in November 2017.

Democrats hold a 12-point lead over Republicans in a generic congressional ballot poll released Wednesday morning, reflecting a growing disparity between the two parties with just two months until the midterm elections. "I opened up our handsome economic engine with Regulation and Tax Cuts". In the meantime, major media outlets continue to credit former president Barack Obama for the economy.

"If the Democrats had won the Election in 2016, GDP, which was about 1% and going down, would have been minus 4% instead of up 4.2%", Trump wrote on Twitter on September 10. "Still plenty to do!"