Donald Trump: Why the Republican tax cut bill is a major victory for the US President – Donald Trump’s America
The US Senate has passed the long-promised Republican tax bill, which is the most extensive rewrite of the nation’s tax code in three decades.
It marks a major achievement for the Trump administration, with Republicans having been unable to deliver any major legislative achievements since Donald Trump became president in January.
But why has it taken so long? Here’s an outline of what these tax cuts mean for Mr Trump and the US economy.
It ended up being a bit of a mad rush
Republicans in the US House of Representatives unveiled their 440-page tax proposal on November 2, and just over a fortnight later, it was passed through the tax-writing committee and the full chamber.
The next battle was in the Senate, where Republicans struggled to win over their own party members to support the bill, which went through a process known as budget reconciliation.
But on Friday (local time), the Senate approved their bill in a 51-49 vote, despite Democrats complaining that last-minute amendments to win over sceptical Republicans were vulnerable to being gamed later.
In fact, with all the late changes that were made to the tax bill, it ended up being a mad rush to get it to a vote on Friday afternoon.
Some politicians even complained that there were “handwritten pages” in the bill.
I was just handed a 479-page tax bill a few hours before the vote. One page literally has hand scribbled policy changes on it that can’t be read
Among the proposals that have been flagged are plans to slash the corporate tax rate from 35 per cent to 20 per cent, as well as giving high-income earners personal income tax cuts.
But it had been on Trump’s agenda for a while
The tax plan will:
- Slash the corporate rate from 35 per cent to 20 per cent
- Create three individual tax brackets with rates of 12 per cent, 25 per cent and 35 per cent
- Allow the majority of Americans to file taxes on a single sheet of paper
- Roughly double the standard deduction, a set amount of income exempt from taxation, for all taxpayers
Mr Trump has been pushing for tax cuts since his election campaign and ended up imposing a deadline for the bill to be passed by Christmas.
Republicans have argued that it has been on their agenda for even longer, with the final plan emerging after years of debating various proposed changes to the tax code.
Why was it only passed with a slim majority?
Well, there were a few reasons why some, mainly the Democrats, were opposed to the tax bill.
First is that it’s pretty costly.
The Republicans have approved the bill adding up to $US1.4 trillion to America’s debt over the next 10 years. But some took exception to the huge cost, most notably some members of the Republican party.
That brings us to the second reason. While the plan passed quickly in the House, the Republicans only had a narrow majority in the Senate (52-48), and were faced with some of their own party members threatening to cross the floor.
US media had been reporting that up to six Republicans were considering opposing the plan, including senators Jeff Flake and James Lankford, who had been concerned about the impact the bill would have on the deficit, healthcare and the distribution of tax benefits.
Five of those senators ended up voting in favour of the bill.
Senator Bob Corker remained the only hold out, saying he was unable to support the legislation after his bid to include future tax increases to offset the deficit was rejected.
And third, some of the details of the plan are still unclear.
The Senate’s final draft of the bill moved so fast that it was unavailable to the public until just a few hours before the vote.
On top of that, the framework for both the Senate and House bills had been developed in secret over a few months by half a dozen Republican congressional leaders and Trump advisers.
There was apparently little input from the party’s rank-and-file and none from Democrats.
So, it’s a pretty big deal
Expectations of lower taxes have helped drive the S&P 500 up more than 20 per cent since the 2016 presidential election, with investors counting on lower tax rates to boost company earnings.
UBS America’s chief investment officer Mike Ryan said last week that “prior to the election there was no discussion about tax reform”, but that has changed since Mr Trump came along.
A failure to pass the cuts would have heightened concerns among businesses and investors about the Trump administration’s ability to pass legislation.
That would have seen some of the steam taken of the market, and perhaps some uncertainty start to sink in.
The bill has also been seen by Republicans as crucial to their hopes of retaining control of Congress in the November 2018 elections.
It’s a major victory for Trump