Taxes

“Holy crap, what’s this?”

JM Ashby
Written by JM Ashby

You just might say these are the consequences of rewriting a 500 page bill at 1 a.m. on Friday night and then passing it without even reading it.

Experts say the Senate Republican tax bill is filled with loopholes and problems including at least one that we all saw coming a mile and years away.

From Politico:

Some provisions are so vaguely written they leave experts scratching their heads, like a proposal to begin taxing the investment earnings of rich private universities’ endowments. The legislation doesn’t explain what’s considered an endowment, and some colleges have more than 1,000 accounts.

In many cases, Republicans are giving taxpayers little time to adjust to sometimes major changes in policy. An entirely new international tax regime, one experts are still trying to parse, would go into effect Jan. 1, only days after lawmakers hope to push the plan through Congress.

“The more you read, the more you go, ‘Holy crap, what’s this?'” said Greg Jenner, a former top tax official in George W. Bush’s Treasury Department. “We will be dealing with unintended consequences for months to come because the bill is moving too fast.”

Republicans are primarily concerned about the alternative minimum tax (AMT) inserted at the last minute by Majority Leader Mitch McConnell because the dirty secret in corporate America is that many of them don't actually pay taxes right now.

For others, the biggest concern is something that anyone who paid attention to Kansas saw coming.

When former Kansas Governor Sam Brownback eliminated income taxes on businesses, a flood of people declared themselves businesses so they would no longer have to pay income taxes. This unintended consequence put the state in an even deeper fiscal hole than officials estimated because an even larger percentage of the state's tax base disappeared overnight.

The Senate Republican tax bill does not eliminate taxes on business, but it does include language that will encourage more individuals to reclassify their income so they can take advantage of lowers rates for pass-through income.

“This is an entirely new concept and, from a tax lawyer’s perspective, it’s like a new paint box,” said David Miller, a tax partner at Proskauer Rose LLP. “We have a new tool to play with.

At the same time, an apparent bid by the Senate to head off tax-avoidance moves involving business losses would dissuade people in certain circumstances from starting companies — though one of the main purposes of the legislation is to improve the business environment, said Don Susswein, a principal at the tax and accounting firm RSM.

“That’s a good example of a provision that was undoubtedly well-intentioned, trying to solve a very narrow problem, but maybe they didn’t have the time to really get it right,” he said. “Hopefully, it will be closely examined in conference.”

Yeah, maybe not.

We should assume the cost of the GOP tax bill will be far higher than the $1.5 trillion in deficit-spending they've made room for under the reconciliation process. After all, the Congressional Budget Office and Joint Committee on Taxation can only score what's in front of them and not the unforeseen consequences of a bill that was more or less written on a cocktail napkin at midnight in the cloak room.

I jest, but I'm not necessarily exaggerating. Changes to the bill were literally scribbled in on the margins after most people had gone to bed.

  • Ashlyn Brooks

    Everything has been in a ludicrous spree since the last election.

    Everyone is going mental and they take pride in such a disease.

    No wonder the demand for psychiatrists and psychologists is on the rise all over United States and healthcare organizations like Healthcare Marketers are earning a lot for their services.

    http://www.hcmarketers.com/psychologist-email-list

  • muselet

    Sloppily-written laws make lawyers happy. Sloppily-written tax laws make lawyers and accountants happy.

    This tax bill is no exception. Lawyers and accountants and wealthy people and corporations are delighted.

    Pity, the rest of us have to suffer for their happiness.

    –alopecia

    • I’m a lawyer and this does not make me happy.

      • muselet

        I painted with a very broad brush (it’s a comments thread on the internet, it’s nearly mandatory).

        No insult to honorable lawyers or accountants was intended.

        –alopecia

  • fry1laurie

    “Experts? We don’t need no stinking experts!”

  • Dread_Pirate_Mathius

    My firm is already reviewing whether and how to classify its employees as businesses.

    And we’re looking at it, you can be sure every other hedge fund out there is thinking the same thing.

  • ninjaf

    And again my stomach ties in knots in anticipation of what they are doing to this country, all in the name of saying they passed a freaking bill.

    • Badgerite

      Some, Bannon and Norquist, actually want to break the government.

      • Scopedog

        Yep. They bragged about it…and yet the MSM just looks and says, “Aw, look how pugnacious but strident they are! And they have fresh ideas!”.

        • Badgerite

          Figures.