McCain gives support to imperfect Senate tax plan

On Wednesday the U.S. Senate moved their proposed tax bill from Committee to a floor debate, along partisan lines, signalling the desire to make the deadline to put tax reform on President Trump’s desk by Christmas; and after reconciliation with the House version, to win a sorely needed legislative win from an administration that has seen only failure in its attempts to craft successful legislation, and that many, including conservatives, especially the ultra-right wing have written off as ineffective.

Hope springs eternal, and one of the more illuminating signs is that Trump who has been mostly disengaged from the process, but now, some observers have noted, he is on more familiar ground, having used a loss of $916 million for a tax break, and that he touted on the 2016 campaign. In fact, to the surprise of some of his staff, they have never seen him so energized.

The Senate version does have many senators nervous about deficits, as we have noted before, so much so that Bob Corker of Tennessee, has asked for a trigger to automatically increase taxes, if the bill fails to both generate and stimulate the economy, and increases the deficit.

This has become wildly unpopular by his fellow senators, with the exception of Sens. Flake of Arizona and Lankford, of Oklahoma. In fact, the consensus of many is that this has the effect of “hobbling the bill’s ability to spur economic growth.”

With a need to get 50 votes, versus 52 with Democratic help, which is nigh to impossible at this point, conservative senators, such as those three, could help push the bill to get the needed votes.

In a surprise move on Thursday, Arizona Sen. John McCain gave his, albeit reserved endorsement, of the Senate plan, and said in a statement: “I believe this legislation, though far from perfect, would enhance American competitiveness, boost the economy, and provide long overdue tax relief for middle class families.”

With the veteran senator giving his even limited imprimatur on the plan, this is a boost to moving it along. Yet, his support on previous tax cuts has been underwhelming, as he did, by dissing them, with President Bush’s considerations in both 2001 and 2003.

Is the old warrior merely tired, after health issues, or has he been persuaded to help push the boat into the water, even if others have to keep it sailing?

Crain’s Chicago Business noted in its coverage, that “The Arizona lawmaker joins Lisa Murkowski of Alaska -- another GOP senator whose support had been in question -- in publicly endorsing the Senate tax bill in recent days. “

A much anticipated report from the Joint Committee on Taxation, came out with its assessment of the plan, but not one to bring joy to the debate. It revealed: “A new analysis released today by the Joint Committee on Taxation found that the Senate tax bill would generate enough economic growth to lower its $1.4 trillion revenue cost by only about $458 billion over a decade. After accounting for interest rates, the growth figure would fall to $407 billion, said the JCT, Congress's official scorekeeper on tax legislation. That would leave a 10-year revenue loss of roughly $1 trillion.”

As mainstream media has noted, “Discussions have centered around a $350 billion tax-increase trigger, far short of the $1 trillion revenue loss the JCT projects.

This is not the first misrepresentation -- on Sunday Kevin Brady, chair of the House Ways and Means Committee, said on FOX-TV that there would be a 70 percent, or better tax savings to families making less than $200,000 --  but as FactCheck.org showed, that this figure would only apply to individuals under tax changes that would only be seen in 2019.

Perhaps the most glaring discovery was that by 2027, 50 percent of the tax relief would go to those making over $200,000, exceeding the markers of what defines a middle-class income in America.

Going even further is that the new tax proposed bracket consolidation, after being adjusted for inflation, will have most people pushed into higher tax brackets.

The Senate bill includes a provision that repeals all the individual tax cuts by 2026, which would tend to crimp economic growth. Senate tax writers included the expirations to make the bill comply with Senate rules against budget legislation increasing long-term deficits.

The new estimate “ends the fantasy about magical growth and claims that tax cuts pay for themselves,” said Senator Ron Wyden, the top Democrat on the tax-writing Senate Finance Committee, who called the finding the “total opposite” of what Republicans have said.

Not to be outdone, the right had its reply and “A  conservative-leaning policy center, the Washington-based Tax Foundation, released a statement saying JCT's findings were “likely underestimating the economic growth spurred by this tax bill.”

“The range of estimates from JCT includes several important assumptions that limit its growth results, particularly, assumptions regarding the Federal Reserve's response to potential inflation and the United States being a closed economy,” the policy group said in a statement. The group is working on its own score for the latest version of the Senate bill.”

Up next is a spirited debate, about 20 hours worth, on the Senate floor, and votes on various amendments that every bill goes through -- a time honored process that has been given the name of “vote-a-rama,” by waggish veterans.

This is a developing story, be sure to come back for updates.

Lisa Murkowski endorses repeal of the individual mandate

For the last several days, there has been more ink spilled about the Senate version of Tax Reform that, as the old adage said, “than Carter had pills.” Perhaps the biggest news is that there may be less damage to the markets, but far less money saved than is touted by the Trump Administration, and that has also had many heads shaking, and tongues wagging, over what was the main selling point touted by the White House, and had Democrats seething.

“In a recent report, Standard & Poor’s estimates that a repeal of the individual mandate would save the government about $60 billion to $80 billion over the next 10 years—far less than the $338 billion that the CBO projected. S&P also predicted that a repeal would increase the number of uninsured individuals by just 3 million to 5 million, while the CBO estimated 13 million,” reported the blog, FierceHealthcare.

On the other side of the political coin, are those that are saying that repealing the individual mandate, has only a minimal affect on whether they will, or won’t buy healthcare, because they need it, and some are young, and some are not so young.

On the GOP side, there are those that want to traverse the divide, and the most prominent seems to be Alaskan Senator Lisa Murkowski, who wrote in an Alaskan newspaper, “I have always supported the freedom to choose,” Murkowski said in an opinion column published a few days ago and now her official stance, the national media reported Thursday. “I believe that the federal government should not force anyone to buy something they do not wish to buy, in order to avoid being taxed.”

She also noted, in an appeal to those who might object, “the repeal of the tax penalty will not take care away from anyone but rather “provides important relief to those who have been penalized for choosing not to buy unaffordable insurance.”

Straight from the Republican playbook, this assertion holds less than it seems, but after being somewhat of a renegade in previous attempts for health care legislation, Murkowski might have felt the need to carry at least some water for the GOP.

Later on she transitioned to a more Solomon-like position when she acknowledged that “The ACA has helped many people in our state, and across the country. There is no question about that.”

She also affirmed what has been previously noted, when she said. “Some people have been able to buy insurance for the first time in their life, mental health and substance abuse coverage is more accessible now, and insurers cannot arbitrarily deny coverage to those with pre-existing conditions.”

Her remarks seem to highlight the dilemma for heavily GOP states such as Alaska and even Maine: their lawmakers cannot ignore the fact that the ACA, colloquially known as Obamacare has helped thousands, but can’t quite step up to the fore, in working with Democrats to fix the problems of both perception, and fact.

One of the less known truths is that the IRS who manages the tax penalty, has been far less aggressive, in collecting than was first thought.  So, when one reads Murkowski’s statement, that “Alaskans paid over $9 million to the IRS under this penalty in 2014, and over $12 million in 2015.  There are Alaskans making the calculated risk to go without insurance and pay the tax,” she said. “Eliminating this tax would allow Alaskans to have greater control over their money and health care decisions,” it has to be taken with a grain of salt.

It’s important to remember that some plans in Alaska are not as plentiful due to the opposition hammering away at the mandates, that were designed to bring younger and healthier people to buy insurance on the marketplace exchanges, something that did not happen in larger numbers; with many of the young today, as in yesteryear, thinking that they were mostly invincible, when it came to health.

But, the biggest myth about their costs has been spread by President Trump himself. To set the facts, in response, The Washington Post, said: “The White House provided us a May 23, 2017, report by the Department of Health and Human Services, showing premium increases for the individual market. It shows the average national premium increased 105 percent from 2013 (before Obamacare’s major provisions took effect) to 2017, from $232 to $476. In Alaska, the average monthly premium increased to $1,041 in 2017 from $344 in 2016 — a 203 percent increase. That is among the highest percentage increases reported between those two years. But buried in one of the footnotes is a disclaimer that the data used in this report do not take into account premium tax credits, that’s a big caveat.”  

Furthermore, they continued, “The reason it’s important to look at how people are affected after subsidies is that on average, eight out of 10 marketplace enrollees receive government premium subsidies, and they are protected from a premium increase (and may even see a decrease) if they stay with a low-cost plan.”

In the end Murkowski favors the Alexander-Murray compromise to help with the copays, and out of pocket costs of the ACA, but offer states the ability to opt out, of certain provisions, now tied to the repeal of the individual mandate.

Taking a different tack are those people that do like the ACA, or  most significantly that it offers them healthcare, which in some cases, they cannot afford. In fact, 60 percent of people who buy their own insurance, receive subsidies, and do so to avoid costly hospital bills.

A recent article in The New York TImes showed, with interviews, of relatively young people quite different beliefs, than Murkowski has espoused. They state that,”People like  Alexia Manon Senior complicate the argument of Senate Republicans who are counting on repeal of the so-called individual mandate to free up hundreds of billions of dollars to pay for an array of tax cuts to corporations and individuals. They are assuming that without a mandate, many people would no longer buy insurance, so the government would spend billions of dollars less on the subsidies the health law provides to help those under a certain income level pay their premiums.”

So what is the truth? A wise woman once said that it lies in the middle of the two poles, yet with details emerging, it seems, much to the horror and bemusement, of our Canadian neighbors, that it might just be movable, like the unlucky Linus as Lucy once more snatches the ball away at the last minute.

According the Kaiser Family Foundation, only seven percent of people said that would go without coverage if the mandate were no longer enforced.  But, what many are worried about is market stabilization, but if we believe the earlier figures, then the market would stabilize, or at least not  as unstable, as previously thought.

The KFF also found that while most people hated the thought of the mandate, at first blush, when they were told what what it would do, and who it would help they changed their minds, showing that opposition to the ACA, a longheld obsession with the GOP is based on misinformation, in some cases, deliberate.

One effect that most can agree on is that those who would depart the exchange would see a decreased presence by major insurers, and this would weaken the choice that so many toute, was lost with the ACA, or those that are ardently seeking affordable health care coverage, as both KFF and the AAA show.

Also on Thursday, “If the Affordable Care Act’s individual mandate is repealed as part of a Republican tax cut plan, premiums will likely rise and insurers will exit the individual market, according to the American Academy of Actuaries, reported the American Enterprise Ideas.

“In a letter to Senate leaders Mitch McConnell, R-Kentucky, and Chuck Schumer, D-New York, the actuaries warned that without an incentive to obtain coverage such as the mandate, healthier customers would exit the ACA exchanges, leaving a higher-risk pool which is more expensive to cover—a problem the ACA exchanges have already struggled with even with the mandate in place,” they reported.

“Eliminating the mandate without implementing an alternative means to drive enrollment among healthy individuals would likely result in a deterioration of the risk pool due to lower coverage rates among lower-cost individuals,” wrote Shari Westerfield, vice president of the academy’s health practice council.

House passes sweeping tax reform despite critics claims

Thursday afternoon, the House of Representatives in a vote of 227-205 passed what many are calling sweeping tax reform, and also a partisan victory to show that the sagging fortunes of the GOP can be saved with this piece of legislation, and truly govern; especially after the recent victories by the Democrats in elections held earlier this month; and, especially in Virginia.
The bill, known as the Tax Cuts and Jobs Act, as most know by now, slashes the number of individual tax brackets, does away with the state and local tax deduction, puts a cap of up to $10,000 on property tax deduction, and decreases the corporate tax rate from 35 percent to 20 percent.

It also removes the interest deduction that can be taken by borrowers on federal student loans.

“For too long, this broken tax code has eroded America’s economic leadership around the world,” said House Ways and Means Committee Chairman Kevin Brady (R-Texas), the chief architect of the legislation.

It also just made the GOP self-imposed rule of decreasing the federal revenue, or deficit, to $1.4 trillion, which states that legislation cannot increase the federal debt by no more than $1.5 trillion.

13 Republicans broke rank and opposed it, with no Democrats supporting it.

The loss of the state and local tax deduction is a blow to some states such as New York and California; and nearly all of the “no” votes came from these states, and especially from Rep’s, Pete King and John Faso, and from California, Darrell Issa, Tom McClintock, and Dana Rohrbach.

The increase in taxes to most middle class taxpayers, the loss of the so-called SALT (state and local taxes) deduction, the cap on the mortgage deduction, and the loss of the student interest deduction, make it hard to see this as a boon to the middle class, because at its heart this proposal is really about slashing the corporate tax rate, with the subsequent loss of long-standing deductions, to help pay for it.

The Hill reported that “Democrats denounced the bill, saying it mostly benefit wealthy individuals and corporations while increasing taxes on some in the middle class. Rep. John Yarmuth (D-Ky.), the top Democrat on the House Budget Committee, brought a giant check to the House floor debate giving $500 billion to “The Wealthiest 1%” from “The American Taxpayers.” The fake check was signed, “Congressional Republicans.”

The Los Angeles Times noted that “House Minority Leader Nancy Pelosi drew on the teachings of historic and religious figures to warn Republicans off legislation that she said benefits the wealthy and “preys on the middle class.” She also remarked even before the vote that that is “ . . . a shameful piece of legislation.”

Coming next is the Senate version that will begin mark-up the week after the Thanksgiving holiday. But, news from that quarter is bound to be controversial, and after being buffeted, and lampooned in the national press, not to mention by Democratic lawmakers, such as Minority Leader Sen. Chuck Schumer, Republican efforts to pass tax reform took a new tack, late Tuesday night, with an addition to the proposal: the removal of the individual mandate from the Affordable Care Act; something that has always been an option, and that was mentioned just after the inauguration of Donald Trump, as a way for Republican leadership to destroy it.

Of course, all things considered equal the “proposal to the proposal”, is not as popular as it might seem.  First of all, it would increase the insurance premiums offered on the health exchanges that are part of the ACA, as well as employer offered plans, which was also going to happen with Graham-Cassidy, and helped to defeat it.

Secondly, it brings back all of the toxic fumes that swirled on Capitol Hill, each and every time there are attempts to gut the legislative legacy of President Obama; but most of all as the Congressional Budget Office noted, 13 million people would be uninsured, as a result, over the next decade; a true hardship for hardworking American families.

The push for it to be included came in a tweet from Majority Leader Mitch McConnell who said, that the money saved  - approximately $338 billion -  could be used to “puff up some of the middle class tax relief that we would like to puff up,” yet the bill has been shown to increase the national deficit, by at least $1.5 trillion, and that is a conservative estimate, by the Manhattan Institute.

It’s still the reality that much like earlier legislative efforts, the Trump Administration is still focused on wealth transfers to make favorable cuts to the wealthy, and a former adviser to John McCain noted in a recent tweet, “A tax ‘reform’ bill which raises taxes on the middle class, strips millions of families from their health care, rewards the top 1% and balloons the deficit is the political nail in the coffin for the GOP,” sad John Weaver.

Conservative “Blue Dog” Democrats opposed the reform bill on Wednesday for adding to the national debt, unlike the House version, which just made it, under their own rules.

Critics note that could change, especially under pressure, as was done in the House version for the change in the pass through to benefit small business owners, and there is no guaranteed support; especially by senators from high tax states.

It could especially damage the fragile alliance with Sens. Susan Collins, Lisa Murkowski and John McCain, because if they insist on the Alexander-Murray agreement, then the whole ship could sink, as the Senate can afford to lose no more than two votes, to pass the measure.

The Senate, like its House counterpart, also increases the tax bill for some Americans, and not others, mostly the wealthy, and especially those living in Illinois, New York or New Jersey, with the removal of the state and local tax deduction.

It will also not help those who might want to buy a new home, and deduct the interest on payments, since with the proposed the doubling of the standard deduction, (despite differing amounts in the both versions), makes that a less attractive option.

Chicago real estate journalist, Don DeBat, noted in his recent column for a Chicago community newspaper, News-Star, that “existing homeowners can keep their existing mortgage interest deductions, but purchases that are made moving forward will be capped for homes valued at up to $500,000, and limit the deductions to $10,000 for property taxes.”

He notes that this especially affects the local luxury market, quoting experts who say that the “deduction would cut $10,000 to $15,000 in write offs. . .”

So, how does the plan help America’s middle class? Well, it can’t, and it won’t.

On the health front, there has been an appeal, from some, to those to use the more common-sense Alexander-Murray proposal to extend some of the ACA provisions with room for opt-outs from the states, but that is anathema to those who oppose the ACA.

The cut, and the tax increases, angered Murkowski, who said, in exasperation: “tell me how that’s making me a happier person in the middle-class here?”

Perhaps the best remark was from Sen. Murray herself, who said, “Tacking Alexander-Murray onto the partisan Republican tax reform effort is like trying to put out a fire with penicillin.”

In a recent CNN Poll, 6 of 10 voters do not feel that the Trump Administration is doing enough to make healthcare work, the way it should, for Americans.

One long-standing issue is when reconciliation comes, between the House and the Senate versions is the fate of entitlements, the long sought after desire of Speaker Paul Ryan, who has hinted that he is comfortable slashing Medicare by at least 30 percent, if that is what it takes to balance the two bills.

Special interest groups line up to oppose GOP tax reform

The law of unintended consequences applies to crafting legislation as well as life, and the Republican Congress with its tax proposal reforms is now facing a backlash, even protests, as what it sees as a signature piece for their power trifecta with Donald Trump as president.

First up last week was when the National Federation of Independent Businesses, a huge GOP supporter, became angered at a sleight-of-hand trick that would have only some of its members get a tax break with the proposed pass through. Upset at the backlash, Chair of the House Ways and Means Committee Kevin Brady Brady's turnaround “proposed amendment would provide a lower tax rate for smaller firms that otherwise wouldn't have qualified for the 25% rate on pass-through businesses,” reported Business Insider, on their website.

"We are very grateful to Chairman Brady for listening to our concerns and working with NFIB to ensure that tax reform benefits the greatest possible number of American small business owners," Juanita Duggan, president and CEO of NFIB, said in a statement.

"This amendment would create substantial tax relief for millions of small business owners who were left out of the original bill. We urge Republican and Democratic members of the House to support this amendment going forward," she added.

That bullet dodged, next up were the objections of the National Home Builders Association who felt that doubling the standard deduction would be harmful to the new housing deduction, for those filers that itemize on their federal returns, would not have an incentive to build new homes, and perhaps prepare to stay put, or rent.

Current rates reflect 21 percent of filers take this deduction, but NHBA predicts that this could drop to 4 percent if the proposal passes.

If a man’s house is his castle, then a new one, forgetting about the moat, under the GOP plan is going to take more gold than Fort Knox, says the housing industry, and depress the value.

“Specifically, the legislation calls for capping the mortgage interest deduction at $500,000 instead of $1 million [in value]. It would also limit the deduction for state and local property taxes at $10,000. The fear, at least in the housing industry, is that these tax breaks could sap demand for pricey homes, especially in expensive markets. Many of those markets, such as San Francisco and Manhattan, are in high-tax states. That's a problem because the GOP tax plan would eliminate state income tax deductions altogether,’ says CNN Money, and as we have previously noted before.

The National Association of Home Builders warned the GOP tax plan "slams the middle class" by hurting home values. The group complained that Republicans didn't include its proposal to replace the mortgage deductions with a tax credit. "This tax reform plan will put millions of homeowners at risk," said Granger MacDonald, chairman of the NAHB.

Not to be outdone, “The California Association of Realtors is fighting back against GOP tax reform plans, taking out full-page ads in seven California newspapers calling on state Republicans to oppose provisions curtailing tax benefits of homeownership.

Measures seeking to curb mortgage interest deductions, property tax deductions and capital gains exemptions will dampen homebuying while “punishing” millions of other California homeowners, the ads say,” says the Orange County Register on their website.

Things got dicey and somewhat personal when the ads noted, “Tax reform shouldn’t hurt Californians, but the House of Representatives proposal does, in a big way,” the ad says. “How could any member of the California congressional delegation think this plan is good for the Golden State?”

Desperate for a win and sticking to party lines, “U.S. House Majority Leader Kevin McCarthy, a Republican from Bakersfield, [Ca.] issued a statement this week defending the tax plan, saying it amounts to a tax cut when all provisions are taken into account,” they reported.

Or does it? Most that have read the proposal have remarked like, Fortune Magazine, that, “Even though mortgage interest deduction remains, it will no longer have value for current itemizers who would take the standard deduction under the Trump plan. Only the few taxpayers who would still itemize will receive any income tax savings from mortgage interest, however, those tax savings will likely be substantially smaller than under existing tax rules.”

In a nutshell, “The elimination of mortgage-related tax savings for most homeowners, and reduction for others, compounded with the loss of tax savings from deducting property taxes means the after-tax cost of home ownership will increase.”

As early as August, when the details of the proposed tax reform came to light, charitable organizations were worried, and the first on the list was the Lilly Family School of Philanthropy at Indiana University. And, again the culprit was doubling the standard deduction to 35 percent from 39.6 percent, and which has the potential to reduce charitable giving, from between $5 billion and $13 billion, or up to 4.6 percent.

As CNN Money then reported, “Few people donate simply because of the tax breaks and are unlikely to stop giving altogether if they don't get any. But analyses from the Congressional Budget Office and others have found that tax incentives typically increase how much you choose to donate -- whether in life or at death.”

“The double whammy of doubling the standard deduction while lowering the top rate to 35% from 39.6% could reduce giving by between $5 billion and $13 billion a year, or up to 4.6%, according to a recent study by the Lilly Family School of Philanthropy at Indiana University.”

“Of those two changes, increasing the standard deduction has the greatest negative effect because it would reduce those who itemize to just 5% of filers, down from 30% today. That's because the only reason to itemize is if your deductions combined exceed the value of the standard deduction,”

“The 25% who used to itemize will probably give some but not as much," said David Thompson, vice president of policy at the National Council of Nonprofits.

While we may not want to ignore the opportunity for tax reform, since the last try in 1986, it seems that unintended consequences are making the whole deal reek like limburger cheese. Yet, there seems to be hope for some reconciliation at least according to Speaker of the House Paul Ryan who says that it will go to yet another House committee rather than an up or down floor vote.

Many on Capitol Hill are concerned about the deficit, another detail that perhaps GOP lawmakers have not carefully considered.

Last month we reported the following concern: “Rep. David Schweikert, of Arizona, the soon to be retired Sen. Bob Corker of Tennessee, and Rep. Mark Sanford of South Carolina; all of whom seem to see less light, than darkness, on the horizon with what has been proposed. “The numbers are really uglier than almost anybody around this place seems to have digested,” said Schweikert . . . a member of the tax-writing Ways and Means Committee.

The Hill, the ultimate inside the beltway publication, said that “The tax plan could cost the government $1.5 trillion in revenue over the next decade, but advocates argue that would be made up for through economic growth unleashed by the corporate and individual tax cuts included in the plan.”

At that time Treasury Secretary Steven Mnuchin said that the tax plan would bring in $2 trillion because of economic growth, which would be enough to actually lower the deficit. Some were not so sure, even then, and even more so now.

“The running joke in our office is we work in a math-free zone,” said Schweikert, in opposition to that statement.

House delivers its version of tax reform

It’s long been a core belief that politics held the art of compromise as the means to an end, but House Democrats faced a unwillingness by their Republican counterparts on Thursday as they dominated their bill to rewrite the U.S. Tax Code, an ambitious, and long sought desire by many, but also a strong push to score a legislative victory for the Trump administration, who has not had one in the nearly 10 months that they have been in office, despite the benefit of dominating both Congressional chambers.

The bill after it exited committee, still faces a floor debate, but it has several prominent features that the GOP says will give almost everybody a tax bracket, and will help Main Street, as well as Wall Street.

Its main, and most controversial, feature is the removal of the state and local tax deductions, that after four days of debate, stuck fast, despite efforts by some to pry it loose from the gums of debate.

The bill also slashes the corporate tax rate from 35 to 20 percent, and claims to offer tax benefits to small business, and offer punitive measures to those companies that make money overseas, once it is repatriated to America.

“Americans deserve a new tax code for a new era of prosperity, and today we deliver,”  said chair, Kevin Brady (R-Texas.)

In total disagreement are the House Democrats, who say, the “Joint Committee on Taxation estimates that showed some middle-class taxpayers would still see their taxes go up, particularly in later years,” and there are also claims that “This bill will raise taxes on the middle class. It will raise taxes on the middle class. It will raise taxes on the middle class,” said Rep. Joseph Crowley (D-N.Y.), reported The Hill, on its website.

“You don’t have very many tools available to you as the minority members of the House, not like the Senate,” said Ways and Means Committee ranking member Richard Neal (D-Mass.). “And so you use messaging to make your argument and hope that the other side might, on a couple at least, acquiesce.”

The proof of that pudding was in the eating, and the Dems had to swallow a lot as each of their objections were shot down as “political theater,” sniped Sen.T om Reed (R-N.Y.)

As has been noted before the removal of the state and local tax deductions will hit many people hardest, especially those with Democratic majorities, a fact that did not go unnoticed by Republican lawmakers.

The removal of the state and local income tax deductions seems punitive because it only hits those who itemize on their returns, plus those cities that voted in the majority for Hillary Clinton in the 2016 election. According to the Tax Foundation only 28 percent of taxpayers take advantage of this specific deduction, most Americans don’t, but the opposition remains.

New York City, as well as New York State, is a perfect example of how to raise the ire of those long used to something, to only have it taken away. The benefit allows the average New Yorker to deduct roughly $20,500 annually from his or her federal taxable income, according to the nonpartisan Tax Policy Center.”

“The Independent Budget Office has estimated that doing away with the deduction would increase New York City residents' taxable income by $28 billion, causing their collective federal tax bill to rise by $8 billion a year. The state and local deduction especially benefits people with incomes of $100,000 or more who live in places like New York, New Jersey and California, where state, local and property-tax bills are high,” says Crain's New York.”

Tax Policy Center senior fellow Frank Sammartino estimates the state and local deduction costs the government about $100 billion in annual revenue, so repealing it could help pay for the tax cuts Trump is proposing for businesses.

"There has been a big campaign by municipalities to save the deduction because they don't want folks to realize how large their tax burdens really are," said Nicole Kaeding, an economist at the Tax Foundation.

Taking it a step further, the bill also caps the property tax deduction at $10,000, but in an odd twist, the GOP seems to feel that this will be a benefit, after the loss of the state and local tax deduction.

As predicted the House bill did cut the corporate tax rate from 35 to 20 percent, which has been on the hit list of tax reformers as a way to increase, retain and attract business development, and especially to avoid those that create foreign headquarters to avoid paying U.S. corporate tax, currently the highest in the world.

The House bill also gives a sleight of hand trick with the pass through rate for small business. Robert Robb noted in his piece for azcentral.com noted: “Thirty percent of the total income a working owner receives is designed a return on capital and subject to the lower 25 percent rate. Or the business can come up with an alternative based upon somehow calculating actual capital invested and multiplying that by a rate of return dictated by the government. But, if an alternative is chosen, the business has to stick with it for five years. And some professional service firms – such as lawyers and accountants – aren’t eligible for the lower pass-through profit tax at all.”

In another critical assessment Forbes Magazine noted that, “The provision also discourages professional services and other business from taking advantage of the lower business income rate altogether. But perhaps most important, it would only help a tiny fraction of business owners, individuals with taxable income above $200,000, or $260,000 for couples,” often hedge fund owners.

The most vocal have been groups that have usually been squarely in the corner of the GOP, namely the National Federation of Independent Business, who in their protest, said, “"We believe that tax reform should provide substantial relief to all small businesses, so they can reinvest their money, grow, and create jobs.”

In contrast, and what will eventually be a center stage fight, is to reconcile the bill passed by the House, versus the Senate version, who differs on key points, and which has powerful backers, all who want to be the first to get a final product on the president’s desk by Christmas, and this is next.